Stocks slide as Trump, Xi speak amid trade tensions

AFP | London

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Stocks markets slid yesterday after US President Donald Trump and Chinese leader Xi Jinping spoke amid their trade war, while the European Central Bank signalled an end to its rate-cut cycle.

Wall Street’s major indices rose modestly as trading got underway, but had trouble holding onto the gains and soon slid into the red.

Chinese state media reported that Xi had held a widely anticipated call with Trump, with investors hoping it could ease trade tensions -- but no details were provided.

The call follows officials from the world’s two biggest economies accusing each other of jeopardising a trade war truce agreed last month in Geneva.

“The stock market has traded more timidly of late... mindful that there are a number of loose ends out there on the tariff front, not the least of which is the direction the US-China trade relationship is headed,” said Briefing.com analyst Patrick O’Hare.

After his return to the White House Trump launched a tariffs blitz, introducing a 10 percent minimum tariff and higher rates on many countries, with China subject to the highest rates.

Some of the higher rates have been suspended as negotiations are underway.

European stock markets were also in the red even though the ECB cut its key deposit rate a quarter point to two percent, as expected.

It was its eighth reduction since June last year when it began lowering borrowing costs.

But ECB President Christine Lagarde stated the central bank is “getting to the end” of the rate cutting cycle, as inflation has largely dropped to its two percent target in the 20-nation currency bloc.

That sent the euro surging against the dollar and European stocks gave up gains.

The ECB’s series of cuts stands in contrast to the US Federal Reserve, which has kept rates on hold recently amid fears that Trump’s levies could stoke inflation in the world’s top economy.

Investors are now looking to the release on Friday of US non-farm payrolls data, which the Fed uses to help shape monetary policy.

Other data released this week has been mixed. April jobs openings data beat expectations, but according to payroll firm ADP private-sector jobs rose by only 37,000 last month.

This was a sharp slowdown from April’s 60,000 and less than a third of the amount forecast in a Bloomberg survey. Another survey showed activity in the US services sector contracted in May for the first time since June last year.