Global Stocks Wobble With `No Way to Know' Where Trade War Going

(Bloomberg) -- Peace proved perishable again for investors after China retaliated to Donald Trump's tariff proposal with its own levies on $50 billion of U.S. imports.

Asian and Europe stocks fell and U.S. futures slid after China announced 25 percent tariffs on 106 U.S. products in a response to proposed American duties. Gold and the Japanese yen rallied.

“The flight to safety returns and this reaction once again has investors flocking to havens,” Jingyi Pan, a market strategist at IG Asia Pte.

Familiar Trades

"It is an interesting move. The market is very confused there is no way to know where this is going,” Stephen Innes, head of trading for Asia Pacific at Oanda Corp., said by phone. “Stick with your familiar trades. Keep buying gold.”

Scared Amid Volatility

Investors are scared amid the volatility as moves aren't related to fundamentals, said Alan Richardson, fund manager at Samsung Asset Management Ltd and added that it will be hard to manage “liquidation risk” as there's no opportunity to diversify.

Collateral Damage

“Risk of further escalation remains and global financial markets will be the collateral damage until cooler heads emerge,” said Norman Chan, chief investment officer at Oreana Private Wealth.

“The market is in chaos and panic in the near term and short term investors should take cover.  Long-term investors can try bargain hunting quality stocks or funds at discount that won't exist without this trade tension,” he added.

Tricky One

“This is a tricky one for markets. China showed admirable restraint at first but obviously when that didn't work, it had to retaliate. Nothing suggests that this will make the U.S. stop either -- it's clearly not a one-off exercise from Trump,” said Thomas Thygesen, SEB AB's head of cross-asset strategy in Copenhagen.

“Sentiment is quite negative and the one thing that could change this is some sort of signal from central banks that they are willing to adapt their hawkish tone.,” he added.

China's Determination

“China's prompt move shows its determination -- it's not afraid of a trade war and won't surrender to any intimidation. We are drawing more closer to a trade war now, and it's going to hurt the global markets bad for sure,” said Qun Liao, Hong Kong-based chief economist with China Citic Bank International Ltd.

Months Not Weeks

A U.S. China trade deal could take months instead of weeks to reach, said Chua Hak Bin, a senior economist at Maybank Kim Eng Research. Trump will want to emerge as the “winner” in this trade war before the mid-term elections.

--With assistance from Sarah McDonald

To contact the reporters on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net, Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net, Amanda Wang in Shanghai at twang234@bloomberg.net, Moxy Ying in Hong Kong at yying13@bloomberg.net.

To contact the editor responsible for this story: Divya Balji at dbalji1@bloomberg.net.

©2018 Bloomberg L.P.

With assistance from Abhishek Vishnoi, Sofia Horta e Costa, Amanda Wang, Moxy Ying