Investors on alert even as Wall Street shrugs off tariffs

Another round of sweeping tariffs could knock Wall Street off track.
Another round of sweeping tariffs could knock Wall Street off track. PHOTO: AFP

SAN FRANCISCO • Wall Street has taken the China-US tariffs enacted on Friday in its stride so far, but investors are on alert for a ramp-up in the trade conflict.

Stock investors had been bracing themselves for weeks for Washington and Beijing to place the tariffs on US$34 billion (S$46 billion) of each other's goods, and share prices were occasionally hurt by escalations in rhetoric along the way, with certain sectors taking a bigger hit than others, as traders avoided companies seen taking the heaviest blows.

Another round of sweeping tariffs could knock Wall Street off track.

US President Donald Trump last Thursday upped the ante on his country's largest trading partner, warning that the United States may ultimately target more than US$500 billion worth of Chinese goods, roughly the total amount of US imports from China last year.

"The real question is, how long do we stay in the trade war?" said Mr Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "If we got to that point (of escalation), all bets are off for any continuation of the bull market."

The Standard & Poor's 500 index rose nearly 1 per cent on Friday, with traders saying they had priced in the US and China enacting tit-for-tat duties. The S&P 500 is still up 3 per cent year to date and the Nasdaq is up 11 per cent, near record highs.

The spectre of a full-blown trade war also risks sinking China's markets deeper into bear territory. Six months of wrangling over tariffs with the US has wiped out about a fifth of China's stock market value.

Investors are now laser-focused on any warnings that companies might give about the impact of tariffs when reporting second-quarter results over the next few weeks.

S&P 500 companies are expected to report 21 per cent growth in earnings per share for the June quarter, according to Thomson Reuters I/B/E/S.

REUTERS

A version of this article appeared in the print edition of The Sunday Times on July 08, 2018, with the headline 'Investors on alert even as Wall Street shrugs off tariffs'. Print Edition | Subscribe