Global shares fell on lower than normal volume as investors waved off stronger than expected US manufacturing numbers and focused on fears of increasing global trade tensions.
The dollar climbed, roiling emerging markets, while oil retreated from its highest level since 2014 following President Donald Trump’s call for Saudi Arabia to increase production.
Sterling declined in yet another big week for Brexit, and the euro came under pressure as tensions deepened in the Angela Merkel’s German coalition.
“It’s not a happy start to the second half,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“Trade war concerns, US sanctions, Trump’s rants and political problems in Europe, as well as worries about slowing emerging-market growth are all playing their part,” he said.
The S&P 500 Index led by weakness in energy and durable goods, which also weighed on the Dow Jones Industrial Average.
The US Institute for Supply Management reported that manufacturing expanded faster than forecast in June.
“Trade and tariff tensions continued to weigh on global equities as well as emerging market currencies,” John Stoltzfus, the chief investment strategist at Oppenheimer & Co, wrote in a note to clients.
“This is likely to persist particularly as the July 6 deadline looms for the Trump administration’s planned imposition of tariffs,” he said.
Emerging-market stocks retreated, giving up almost half of gains posted on Friday, while developing-nation currencies also fell.
Mexico’s peso reversed gains following the country’s presidential elections.
Earlier, benchmarks in Japan, China, and South Korea tumbled. The MSCI Asia Pacific Index sank to its lowest level since in 10 months.
Trade-war jitters, political risk in Europe and divergence in monetary policy across the globe remain some of the key issues worrying investors.
In China, weaker-than-expected manufacturing data for June added to concern that the country’s growth is softening, while in Japan confidence among large manufacturers slipped during the second quarter.
British factories kept up a steady pace of growth in June but worries about global trade and Brexit knocked confidence about the outlook to a seven-month low.
The IHS Markit-CIPS UK Manufacturing Purchasing Managers’ Index (PMI) inched up to 54.4, where any reading above the 50 mark signals expansion.
Still, June capped the weakest quarter for the British manufacturing PMI in one and a half years.
UK optimism fell to its lowest level this year as factory bosses fretted about cost pressures, possible future trade tariffs, the exchange rate, and Britain’s departure from the EU - now only nine months away.
Here, the Investec Manufacturing PMI survey showed Irish factories boosted output to a five-month high to post a reading of 56.6 in June, boosted by a high level of new orders.
Philip O’Sullivan, chief economist at Investec Ireland, said new exports orders slowed slightly in June from May but demand was buoyant from the US, UK, India, and Russia.
“With global growth expected to remain close to 4% per annum into the medium term, we think this optimism is well founded,” he said.
Bloomberg, Reuters, Irish Examiner staff
