Global stocks fell sharply on Friday after the U.S. imposed new tariffs on several trading partners. Investors awaited U.s. employment data, while uncertainty persisted as to whether this data would influence the Fed’s interest rate cut decision.
The Stoxx 600 index lost approximately 1% in the first hour of trading. Down 1.7% on a weekly basis, the index is poised to record its biggest weekly drop since April. Nasdaq and S&P 500 futures also fell by about 1%.
Trump signed an executive order on Thursday night imposing tariffs ranging from 10% to 41% on imports into the U.S. Tariffs were set at 25% for exports to India, 20% to Taiwan, 19% to Thailand, and 15% to South Korea.
It also increased tariffs on imports from Canada from 25% to 35%, but gave Mexico 90 days to begin negotiations on new tariffs. Société Générale’s Wei Yao said, “The reciprocal tariffs announced on August 1 were slightly worse than expected,” noting that the market reaction was calmer compared to the global asset declines in April. He stated that tariffs of 15-20% have now become more acceptable and manageable.The MSCI Asia-Pacific index (excluding Japan) fell 1.5%, bringing its total loss this week to 2.7%. Japan’s Nikkei index dropped 0.6%, China’s CSI 300 index fell 0.5%, and Hong Kong’s Hang Seng index fell more than 1%.
Wall Street lost value overnight, failing to maintain its previous rally.
The Consumer Price Index (CPI) showed that new tariffs pushed prices higher and that inflationary pressures could increase. Weekly jobless claims, however, indicated that the labor market was stable. Fed funds futures are pricing in a 39% probability of a rate cut in September, up from 65% previously. Today’s US jobless data could completely eliminate the possibility of a rate cut. Expectations are for 110,000 new jobs in July and for the unemployment rate to rise to 4.2%.The dollar found support as the likelihood of interest rate cuts decreased, and gained 1.5%. This represents the largest weekly increase since late 2022.
The impact of tariffs on the Canadian dollar remained limited, while the yen suffered the biggest loss but recovered by 0.2%. The Bank of Japan kept interest rates unchanged but revised its inflation expectations upward. Oil prices fell again after a 1% drop the previous day. Brent crude fell to $71.46 per barrel, while US crude fell to $68.99. Gold rose 0.1% to $3,294 per ounce. Oil prices Brent crude fell to $71.46 per barrel, while US crude fell to $68.99.
