Borrowing costs tumbled yesterday as investors bet central banks will be forced to cut interest rates in a desperate bid to counter the damage caused by Donald Trump’s tariffs.
On another day of turmoil on financial markets – which took losses on stock exchanges to £4.4 trillion this week – yields on government bonds fell in the US, UK and across Europe and Asia.
The carnage came as China ramped up the global trade war by slapping a 34 per cent tariff on all American goods entering the world’s second largest economy. This overshadowed stronger-than-expected US jobs data, with so-called non-farm payrolls, a key measure of employment, rising by 228,000 last month.
JP Morgan strategists raised the odds of a global recession this year from 40 per cent to 60 per cent, declaring: ‘There will be blood.’
A 5 per cent fall on the FTSE 100 in London was echoed across Europe with the Dax down 5 per cent in Frankfurt while the Cac 40 shed 4.3 per cent in Paris, the Ibex 35 lost 5.8 per cent in Madrid and the FTSE MIB dropped 6.5 per cent in Milan.
On Wall Street, the Dow Jones, Nasdaq and S&P 500 were all down more than 5 per cent in late trading.
Flag day: On another day of turmoil on financial markets yields on government bonds fell in the US, UK and across Europe and Asia
On the bond markets, yields fall as prices rise. The prospect of lower interest rates pushed down yields, while at the same time a flight to safety among investors dumping stocks and buying government debt pushed up prices.
In a move that will be welcomed by the White House, the yield on 10-year US Treasuries fell below 4 per cent for the first time since before Trump’s election victory in November, hitting a low of 3.86 per cent having been close to 5 per cent in January. Ten-year UK gilt yields also fell as low as 4.38 per cent – down from 4.8 per cent after Chancellor Rachel Reeves’s mini-Budget last week.
The slide came as a fresh wave of panic rocked financial markets with investors around the world concerned that the US President’s trade war will trigger a global recession.
The threat of recession could set off a wave of interest rate cuts in the coming months, experts believe.
Nigel Green, chief executive of global financial adviser DeVere Group, said: ‘Tariffs are not just slowing trade. They are eroding business confidence, slashing corporate investment plans, and rippling through supply chains that had once powered global growth.
‘The engine of globalization that fuelled decades of expansion is now being throttled.’
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