Global markets faced a sharp selloff on Thursday, with the S&P 500 officially entering correction territory amid escalating trade tensions. Investors sought refuge in U.S. Treasury bonds as concerns over inflation and economic growth mounted following President Joe Biden’s latest tariff threats.
U.S. and European Trade Tensions Escalate
The White House announced potential 200% tariffs on European beverage imports in retaliation for EU-imposed surcharges on American whiskey. This move follows the recent tariff hikes on U.S. steel and aluminum imports, fueling fears of a prolonged trade war.
Stock Market Decline Across Major Indices
On Wall Street, the S&P 500 (.SPX) fell 1.39% to close at 5,521.52, marking a 10.1% decline from its recent record high. The Dow Jones Industrial Average (.DJI) dropped 1.30% (537.36 points) to 40,813.57, nearing correction territory with a 9.4% loss from its previous peak. The tech-heavy Nasdaq Composite (.IXIC) suffered the most, declining 1.96% to 17,303.01, cementing a 14% drop since its last record high on March 6.
The European markets also struggled, though less severely. The pan-European STOXX 600 (.STOXX) ended the day down 0.15%, after rising 0.81% in the previous session. Despite recent setbacks, European equities have outperformed their U.S. counterparts year-to-date, buoyed by increased government defense spending and optimism regarding potential peace negotiations in Ukraine.
Flight to Safety: U.S. Treasury Bonds Surge
Amid the market turmoil, investors pivoted toward safe-haven assets, driving demand for U.S. Treasury bonds. The yield on the benchmark 10-year U.S. Treasury note dropped 4.6 basis points to 4.27%, while the 30-year bond yield fell to 4.59%. The 2-year note yield, which closely tracks Federal Reserve interest rate expectations, declined 4 basis points to 3.955%.
Currency Market Reactions
In the currency markets, the U.S. dollar displayed mixed performance. It weakened against the Japanese yen, falling 0.38% to 147.68, as investors sought traditional safe-haven assets. Meanwhile, the euro dropped 0.33% to $1.085, and the Canadian dollar lost 0.45% against the greenback. The dollar strengthened 0.14% against the Swiss franc, reflecting continued demand for the U.S. currency amid global uncertainty.
Commodity Markets: Oil Prices Decline, Gold Nears Record High
Oil prices retreated following concerns about slowing demand and the broader economic outlook. U.S. crude futures settled down 1.67%, dropping to $66.55 per barrel, while Brent crude fell 1.51% to $69.88 per barrel.
Gold prices, on the other hand, surged to near-record levels, driven by heightened market volatility and expectations of monetary policy easing by the Federal Reserve. Spot gold rose 1.73% to $2,982.84 an ounce, while U.S. gold futures climbed 1.51% to $2,983.50 per ounce, coming within reach of the key psychological threshold of $3,000.
Economic Indicators and Market Sentiment
ABD Çalışma İstatistikleri Bürosu’ndan alınan veriler, üretici fiyatlarının (ÜFE) Şubat ayında değişmediğini gösterirken, Çarşamba günü yayınlanan tüketici fiyat endeksi (TÜFE) verileri enflasyonda beklenenden daha yavaş bir artış olduğunu gösterdi. Ancak bu eğilimler, devam eden ticaret anlaşmazlıklarının ekonomik sonuçlarıyla meşgul olmaya devam eden tüccarlara pek de teselli vermedi.
Looking Ahead
As global markets navigate heightened trade disputes and monetary policy shifts, investors remain cautious. The S&P 500’s entry into correction territory underscores the fragility of current market conditions, with investors closely watching geopolitical developments and central bank decisions for guidance.
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