Global Stocks Waver as U.S. Plots New Tariffs on EU

By David Hodari 

U.S. stocks were set to open lower Tuesday after the Trump administration took a step toward imposing tariffs on imports from Europe.

Futures pointed to the S&P 500 slipping 0.1% at the open, a move that would reverse its small increase on Monday. Dow Jones Industrial Average futures were nearly flat.

Walt Disney Company outperformed its Dow counterparts, climbing 0.9% in premarket trade ahead of its investor day on Thursday, when the media giant is expected to detail its plans to integrate the assets it purchased from 21st Century Fox. Fox Corporation and The Wall Street Journal share common ownership.

In Europe, the Stoxx Europe 600 was up 0.2% in midday trading, with a 1% increase for the index's banking sector outweighing a 0.3% slip in basic resources stocks.

Most U.S. and European stocks were undisturbed by the U.S. Trade Representative office's list of European Union goods that will be subject to tariffs if the bloc continues to subsidize Airbus. Those tariffs would affect about $11 billion in imports to the U.S., including helicopters, bicycles, cheese and wine. Shares in Airbus fell 1.4%.

Still, U.S. Trade Representative Robert Lighthizer said the Trump administration would wait for World Trade Organization clearance to implement the duties. That wait for a WTO green light "is something the U.S. tends to do when they're not fully ready to implement tariffs," said Lefteris Farmakis, global macro strategist at UBS Group. "We've had cases where tariffs are pending and it's probably something the market is willing to look through for now."

The tariff move followed several weeks of reports that the Trump administration was on the verge of completing a trade deal with China after a year of mutual import levies and frosty rhetoric.

While the threat of $11 billion in tariffs is minor compared with the duties the Trump administration initially threatened against China last spring, the impact of trade disputes on the global economy is likely to continue, said Marie Owens Thomsen, chief economist at Indosuez Wealth Management.

After the Democratic Party won control of the House of Representatives in November's midterm elections, "The president feels he has few degrees of freedom left -- trade and foreign policy are two of them and they'll continue to dominate policy," Ms. Owens Thomsen said.

Losses for U.S. stocks Tuesday would come against a backdrop of continuing strength for U.S. equities so far this year, with gains in 2019's second quarter so far extending those of the year's first three months amid investor bets on gentle economic growth this year. The S&P 500 has climbed 2% in April and more than 15% in 2019.

Still, corporate earnings season, which begins in earnest later this week, will be closely examined for signs of weakness.

Investors were awaiting the International Monetary Fund's latest world economic outlook, due to be released later Tuesday. In its January report, the IMF predicted a sharp slowdown in global growth. Minutes from the Federal Reserve's most recent meeting are expected Wednesday.

Gentle gains in Europe followed similar moves in Asia, where Japan's Nikkei 225 rose 0.2% and Hong Kong's Hang Seng Index climbed 0.3%.

Losses would come against a backdrop of continuing strength for U.S. equities so far this year, with gains in 2019's second quarter so far extending those of the year's first three months amid investor bets on gentle economic growth this year. The S&P 500 has climbed 2% in April and more than 15% in 2019.

Elsewhere, the British pound ticked up 0.1% against the dollar, as U.K. Prime Minister Theresa May was set to travel to Berlin to meet German Chancellor Angela Merkel and French President Emmanuel Macron to discuss the prospect of a long delay to Brexit. Talks between Mrs. May's government and Jeremy Corbyn, leader of the opposition Labour Party, continued.

In commodities, Brent crude oil was up 0.1% at $71.13 a barrel, remaining close to its highest level so far this year, amid rising supply fears in Libya.

Write to David Hodari at [e-mail]

(END) Dow Jones Newswires

April 09, 2019 07:57 ET (11:57 GMT)

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