The threat of a global trade war sent stock markets sliding and investors rushing for the safety of currencies like the yen and government bonds on Friday, after U.S. President Donald Trump announced tariffs on up to $60 billion of Chinese goods.
World stocks went down by 3.4 percent since Monday, are on course for their worst week since early February, when a spike in volatility sent markets into a tailspin.
European stocks fell at the open, with Germany’s Dax down 1.6 percent, the French CAC 40 by 1.5 percent lower and Britain’s FTSE 100 by 0.8 percent in the red.
That followed large falls in the U.S., with the S&P 500 shedding 2.5 percent, and overnight in Asia, where the Japanese Nikkei 225 was the biggest loser slumping 4.5 percent.
Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although the measures have a 30-day consultation period.
In commodity markets, oil prices recouped overnight losses after Saudi Arabia said that OPEC and Russian-led production curbs introduced in 2017 will need to be extended into 2019.
U.S. crude futures were up 0.8 percent at $64.79 per barrel after losing 1.3 percent on Thursday and Brent gained 0.45 percent to $69.22.
Copper and iron prices both fell, as investors bet demand for the metals would suffer in a trade war.
Daniel Lockyer, senior fund manager at Hawksmoor Investment Management, said financial markets had got ahead of themselves and were failing to price in the risk a number of factors could trigger a sell-off.
“It’s not that we thought trade wars would cause the market to fall, it’s that there was too much optimism priced into stock markets,” he said.