Dow Jones loses over 400 points as stocks sink on trade-war fears

North American markets closedsignificantly loweron Friday, failingto bounce back from steep losses this week as concerns about the start of a potential global trade war between the world's two biggest economies intensified selling in the final hour of trading.

In New York, the Dow Jones industrial average lost1.8per cent or 425points to 23,533, while the broader S&P 500 index fell2.1per cent to2,588 points.

The tech-heavyNasdaqcomposite ended lower by2.4per cent to 6,993points.

The losses for the week were even larger with the Dow losing 5.7 per cent, the S&P 500 down almost six per cent, while theNasdaqplunged 6.5 per cent.

All three benchmark indexes saw their biggest weekly percentage declinesince January 2016.

Trade war fears heightened after Chinaresponded to U.S. President Donald Trump's planon Thursdayto put tariffs on up to $60 billion of Chinese goods by announcingplans of its ownto hit up to $3 billion of U.S. imports with tariffs.

But the Asian giant also urgedthe U.S. to "pull back from the brink" in order to avoid a trade war.

"China doesn't hope to be in a trade war, but is not afraidof engaging in one," China'scommerce ministry saidina statement. "China hopes the United States will pull back from thebrink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place."

Then in another surprise move on Friday afternoon, Trump signedthe new $1.3 trillion spending bill passed by Congress toavert a shutdown of the U.S. governmentjust hours before federal funding wasset to expireafterearlier threatening to veto the bill.

"I will never sign another bill like this again," he continued to threaten at a press conference at the White House after the signing.

Markets 'more affected'

Andrew Kenningham, chief global economist at research firm Capital Economics said that while the economic impact of the tariffs announced by Trump will be small even if they areimplemented in full, the "protectionist announcements and actions may continue to weigh on investor sentiment."

"In short, markets will be more affected than the economy," he said. "At face value, the tariffs on China would cover less than three per centof total U.S. goods imports, similarto those on steel and aluminum.

"We think the biggest fallout will continue to be for equity markets. Markets which are likely to be among the worst affected include those which are reliant on supply chains linked to China, notably Taiwan, as well as companies which could be hit by Chinese retaliation," he added.

Asian markets had closed sharply lower on Friday, with the region's biggest market Japan's Nikkei 225 index plunging 4.5 per cent, while Hong Kong's Heng Sengfell 2.5 per cent. Mainland Chinese shares tumbled with the benchmark Shanghai Composite losing 3.4 per cent.

"Global equity market sentiment remains downbeatas U.S. tariffs aimed at China have flared tensions between the two nations and prodded concerns of a broader escalation," said Carl Campus, economist at BMO Capital Markets in a note.

Inflation heats up

Canadian shares, meanwhile, saw their biggest weekly loss since early Februaryafter economic data showed that inflation rose to the fastest pace in three years, putting pressure on consumer-related stocks.

Consumer priceswent up at an annual pace of2.2 per centin February due toincreases in energy prices. That is the highest level since 2014.

The S&P/TSX Composite Index lost 1.1per cent to 15,224 points, but for the week was down over three per cent.

Health-care stocks were among thefewgainers led by marijuana companies.

Shares of the country's largest marijuana producerCanopy Growthjumped overfiveper cent after the government moved closer to legalizing recreational use by this summer.

Investors fleeing to the safety of gold, which was trading at its highest in over amonth, also boostedmaterial stocks, with Barrick Gold up 2.6 per cent.

The Canadian dollar was also higher on the inflation data, closing at a trading average of77.78cents US,up from an average price of 77.47 cents on Thursday.

Trade tensions

7 years ago

Duration 7:05

The panel on geopolitics and the wild week in equity markets