World equities wobbled yesterday after G20 finance ministers failed to renew an anti-protectionist pledge, in the face of Donald Trump’s “America First” push.
Much of Asia and Europe also beat a retreat as investors took profits from last week’s bumper gains and swapped risky equities for safer assets.
Over the weekend, in an early taste of what Donald Trump’s presidency spells for the world, the G20 failed to get Washington to sign off on a pledge to reject protectionism in a closing statement.
Commitments of support to the existing multilateral trade system, including the World Trade Organisation (WTO), were also conspicuously missing from the final communique from the meeting of finance ministers from the G20 group of developed and emerging nations in the German spa town of Baden-Baden.
“The European equity markets started the week on a heavy risk-off sentiment after the G20 communique explicitly reflected the US intentions to establish trade protectionist measures,” said London Capital Group analyst Ipek Ozkardeskaya.
The move follows Trump’s warnings to throw up levies and revise global agreements he says are unfair to the United States.
Citi analyst Ebrahim Rahbari argued in a note to clients that rising protectionism posed a key risk to the world economy.
“Overall, we continue to think that the new US administration will pursue a more aggressive position on international trade,” Rahbari said.
“We see a continuation of the gradual rise in protectionism in recent years and for globalisation to stall, but we see a major rise in protectionism — including the risk of trade wars — as one of the main risks to the global outlook.”
In London, the pound took a small hit, initially dropping around half a cent, after the British government announced it would begin the two-year procedure to exit the European Union on March 29.
“The news was hardly a surprise — however the reminder that the UK is facing years of difficult and likely hostile trade negotiations seemed to suppress investors’ appetite for the currency,” said Spreadex financial analyst Connor Campbell.
The drop in the value of the pound helped push up the FTSE 100 index by 0.07% to a new record high.
Many of companies listed blue chip have most of their revenues in other currencies which are inflated when converted into weaker sterling.
Vodafone shares dipped 0.4 after the British mobile phone giant revealed it will merge its Indian unit with Idea Cellular to create India’s largest telecoms operator.
In Mumbai, Idea Cellular reversed an early rally to sink 7%. The news followed months of speculation they were ready to sign a deal to help fend off fierce Indian competitor Reliance Jio.
In Zurich, Swiss banking giant UBS saw its share price slide 0.9% to 15.89 Swiss francs.
Legal sources told AFP on Monday that UBS will go on trial in France for establishing a wide-ranging tax fraud scheme worth nearly €10bn.
UBS will be charged with illegal banking practices and dissimulating tax fraud, the sources said, adding UBS’s French subsidiary will also go on trial for complicity.
In London, the FTSE 100 closed up 0.07% to 7,429.81 points; Frankfurt — DAX 30 fell 0.4% to 12,052.90 points and Paris — CAC 40 closed down 0.3% to 5,012.16 points at the close yesterday.
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