GLOBAL MARKETS-Fear of expanding trade war sinks global equities; bonds rally

By David Randall
NEW YORK, Dec 3 (Reuters) - Signs that a deal to end the
trade war between the United States and China might not come
until after the November 2020 elections weighed on global equity
markets Tuesday as investors sought out the perceived safety of
bonds.
The comments by U.S. President Donald Trump that the trade
war may last another year came a day after his administration
announced new tariffs on steel from Brazil and Argentina and
threatened duties of up to 100% on French goods from champagne
to handbags because of a digital services tax that Washington
says harms U.S. tech companies. His latest comments appear to dash hopes that an agreement
with China could be reached before another round of tariff hikes
kicks in on Dec. 15.
“As we get closer to the December 15th deadline for new
tariffs being imposed on China, risk markets will likely become
increasingly nervous as each day passes if we get no news
confirming either a date to sign a phase one deal or a delay in
these tariffs being imposed," said Mohammed Kazmi, portfolio
manager for UBP's Global & Absolute Fixed Income team.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.88%, following broad declines in Europe.
On Wall Street, the Dow Jones Industrial Average .DJI fell
338.45 points, or 1.22%, to 27,444.59, the S&P 500 .SPX lost
36 points, or 1.16%, to 3,077.87 and the Nasdaq Composite
.IXIC dropped 116.41 points, or 1.36%, to 8,451.58.
Europe appeared to be the next theater of the global trade
war.
"If history is any guide, the Europeans are likely to find
U.S. crosshairs start to move increasingly their way, the closer
to next year's U.S. election we get," CMC Markets told clients.
France said Tuesday that it was prepared to push the
European Union to respond in kind if the United States followed
through on its threats to raise tariffs.
"In the case of new American sanctions, the European Union
would be willing to retaliate," French Finance Minister Bruno Le
Maire told Radio Classique. Investors sought out bonds as a safe haven, pushing U.S.
Treasuries yields off of two-week highs. Benchmark 10-year notes
US10YT=RR last rose 21/32 in price to yield 1.7654%, from
1.836% late on Monday.
German bond yields meanwhile, slipped off three-week highs
DE10YT=RR , but bond prices are likely to stay under pressure
amid renewed risks of early elections or a minority government
in the biggest euro zone economy. The safe-haven bid was in evidence on currency markets too,
with the yen at a one-week high to the dollar JPY=D3 . The euro
edged away from a near two-week peak versus the greenback
EUR=EBS . The dollar index slipped to a two-week low .DXY .
"This may have run its course, but there's no reason to
chase the dollar's upside from here," Daiwa Securities' foreign
exchange strategist Yukio Ishizuki said, noting that the weak
manufacturing data had forced many to cut long dollar positions.
"Trade friction remains a lingering threat, which is not
good for market sentiment."

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Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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