NEW YORK (REUTERS) - US President Donald Trump's move to cancel a planned summit with North Korean leader Kim Jong Un sent global shares lower on Thursday (May 24), while auto stocks continued to decline on tariff fears.
Trump said he cancelled a June 12 summit citing “tremendous anger and open hostility” in a recent statement by the East Asian country.
The move came after North Korean media reported earlier that the country had blown up tunnels at its nuclear test site, which had raised the possibility of the summit.
Trump on Wednesday ordered a national security probe into car and truck imports that could lead to new tariffs, with China calling the move an "abuse" of the clauses and saying it would defend its interests.
The decision added to jitters over the prospects of trade negotiations with China, reignited after Trump called for "a different structure" to any trade deal.
After the release of Trump’s letter, stocks sank. On Wall Street, the Dow Jones Industrial Average fell 195.64 points, or 0.79 per cent, to 24,691.17, the S&P 500 lost 16.39 points, or 0.60 percent, to 2,716.9 and the Nasdaq Composite dropped 41.78 points, or 0.56 per cent, to 7,384.18.
The pan-European FTSEurofirst 300 index lost 0.58 per cent and MSCI’s gauge of stocks across the globe shed 0.42 per cent.
As the latest US-North Korea concerns boosted investor appetite for low-risk debt, US 10-year Treasury yields fell to a session low of 2.97 per cent. Gold prices were propelled above US$1,300 per ounce on apparently rising tensions between Trump and Kim. Spot gold added 0.9 per cent to US$1,305.01 an ounce. US gold futures gained 1.19 per cent to $1,304.90 an ounce.
Meanwhile, some investors interpreted Trump’s message with caution.
“I think this is a bit of poker playing, or gamesmanship, that’s going back and forth and it wouldn’t shock me if a week from now, the meeting is back on,” said Joe Saluzzi, co-head of equity trading at New Jersey-based Themis Trading LLC.
Markets had plenty more to digest, including minutes from the latest Fed and ECB meetings, but in Asian and European trading, it was US plans to investigate auto imports that caused the biggest moves.
Trump on Wednesday ordered a national security probe into car and truck imports that could lead to new tariffs, with China calling the move an “abuse” of the clauses and saying it would defend its interests.
Japan’s Nikkei ended down 1.1 per cent after Nissan, Mazda and Toyota all fell. In Europe, BMW, Daimler and Volkswagen lost between 2.8 and 3.2 per cent.
In the currency markets, Turkey’s lira remained the big mover. It weakened to beyond 4.79 against the dollar, surrendering most of the gains it made a day earlier after the Turkish central bank jacked up its key interest rate by 300 basis points to prop up the plunging currency.
The dollar fell against a basket of currencies and hit a two-week low against the Japanese yen, after the US-North Korea meeting was nixed.
Oil prices recorded their largest one-day drop in two weeks amid expectations Opec could wind down an output deal that has been in place since the start of 2017 due to concerns about supplies from Venezuela and Iran.
US crude fell 0.93 per cent to US$71.17 per barrel and Brent was last at US$79.19, down 0.76 per cent.