Global Stocks Slide as Trump Targets $50 Billion China Tariffs in New Trade War

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Market Snapshot

Global stocks weakened Thursday, following a mixed session in Asia, as investors reacted to yesterday's interest rate decision from the U.S. Federal Reserve and braced for the fallout from $50 billion in tariffs targeted towards China as President Donald Trump vows to lower his country's trade deficit with the world's second largest economy.

U.S. equity futures were firmly in the red during European trading hours, with contracts tied to the Dow Jones Industrial Average marked 288 points lower from last night's close while those linked to the broader S&P 500 slumped 29.25 points, or 0.75% amid speculation that Trump is expected to announce the new tariffs, which will largely impact consumer technology goods, as part of his broader effort to both trim China's $375 billion trade surplus and punish the nation for alleged intellectual property violations. Nasdaq futures were marked 98.5 points lower, indicating an opening bell decline of around 68 points based on fair value calculations.

The memorandum, which the White House has said will be called "targeting China's economic aggression" is expected to be unveiled at 12:30 pm in Washington.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower from its Wednesday close at 89.70, weakening on both the prospects of a protracted trade war and a dovish reaction to last night's interest rate decision from the Fed, the first under new Chairman Jerome Powell. Benchmark 2-year Treasury bond yields tumbled 5 basis points to 2.299% while 10-year note yields retreated to 2.84%. 

Watch TheStreet's newsroom discuss Fed day, the aftermath.

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— Brian Sozzi (@BrianSozzi) March 21, 2018

While the central bank lifted its base 'Fed Funds' rate to a range of between 1.5% to 1.75%, Powell did not appear to signal faster -- or more frequent -- hikes between now and the end of the year, even as he repeated his upbeat assessment of the world's biggest economy.

"The job market remains strong, the economy continues to expand, and inflation appears to be moving toward the FOMC's 2 percent longer running goal," Powell said.

Action Alerts Plus holding Facebook Inc. (FB) shares were also in focus, and indicated lower in pre-market trading for the fourth consecutive session, after CEO Mark Zuckerberg broke his silence and apologised for the social media group's data scandal and said he was open to the idea of tougher government oversight for the tech industry.

Facebook shares were marked 2% lower in pre-market trading in New York Thursday, indicating an opening bell price of $166.00 each, a move that would take its week-to-date decline past 10.3% and hive more than $50 billion from its market value. Shares in other social media and data-heavy tech companies were also weaker in pre-market trading, with Twitter Inc. (TWTR) marked 2.23% lower at $32.00 and Action Alerts Plus holding Apple Inc (AAPL) , the world's biggest tech company, indicated 0.83% lower at $169.85. Snap Inc. SNAP shares were indicated .097% lower at $16.41.

In Europe, the Stoxx Europe 600 benchmark, the region's broadest measure of share prices, fell 1.09% even as the single currency slipped to 1.2332 against the greenback following last night's Fed move and private sector data suggested the Eurozone economy slowed again in March.

"It certainly looks like growth has peaked around the turn of the year and we are on a slower growth trajectory now", said IHS Markit's chief economist Chris Williamson. "That's not to say we are indicating any sort of downturn - we are still at elevated levels," he added after PMI data showed first quarter GDP growth is likely to be the slowest in a year.

European bank stocks slipped to an 11-month low amid a combination of downbeat assessments for the current quarter from some of the region's biggest lenders, a surge in interbank lending costs and threats of "tough and intrusive" oversight from the region's regulator.

The Stoxx Europe 600 Banks index, the region's sector benchmark, slipped 2.11% to 175.16 points, the lowest level since April, led by another session of declines for Deutsche Bank (DB) , Germany's largest lender, and an extended slump for Credit Suisse Group (CS) after CEO Tidjane Thiam reportedly described trading in the first three months of the year as "very confused."

Currency markets were the focus of European trading as the weaker U.S. dollar helped lift the pound to a six-week high of 1.4175 as the Bank of England made no change its key rate lending rate but suggested a near-term rate hike as wage growth accelerates and inflation remains stubbornly ahead of his 2% target.

Overnight in Asia, stocks were mixed as traders picked through the text of last night's Fed statement and continued to assess the damage to tech stocks wrought this week by revelations that a British political consultancy improperly gained access to the private data of 50 million Facebook users that it may have used to influence the 2016 Presidential elections.

Watch what one source told TheStreet after the rate hike.

Japan's Nikkei 225, which was closed yesterday for a national holiday, rose 1% to close at 21,591.99 points while markets around the region were mixed, with weakness in China stocks thanks in part to higher short-term interest rates brought by the People's Bank of China and stronger markets in South Korea thanks to a modest rebound for tech stocks and a weaker Korean won.

Global oil prices were modestly weaker after hitting multi-week highs yesterday in New York after a much larger-than-expected 2.6 million barrel decline in domestic crude stocks reported by the U.S. Energy Information Administration.

Brent crude contracts for May delivery, the global benchmark, were seen 20 cents lower from last night's close at $69.28 per barrel while WTI contracts for the same month were seen 8 cents lower at $65.09 per barrel.

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