Unsettled stock market in June due to new trade concerns overshadowing impressive May advancements
Diving into Stock Market Swings in June
Global stock markets are dipping at the start of June, with investors showing signs of wariness over new geopolitical and trade uncertainties. The recent Ukrainian attacks and US President Donald Trump's threats to double steel import tariffs have added to the mix.
The FTSE 100, however, appears to be bucking the trend, holding relatively steady thanks to a lift from defense stocks and a significant jump in oil prices. Despite this, it still underperforms European markets, which are trading around 0.5% lower on average.
A Tsunami of Trade Tensions
The US President's proposed doubling of steel import tariffs—from 25% to 50%—causes ripples in the global market, with steel manufacturers feeling the brunt of the impact. This decision could lead to intense competition among domestic steel manufacturers, as they aim to capitalize on the cost advantages of protected markets.
For foreign steelmakers, particularly those from large exporter nations like Canada, the toxic brew of higher tariffs and potential trade retaliation could lead to significant revenue losses and falling share prices.
Cotton-Mouth Economy
With US steelmakers thriving on home turf, downstream industries, such as automotive and construction, may struggle with surging input costs. This could, in turn, lead to higher consumer prices and a shroud of affordability concerns, especially in sectors like housing.
Furthermore, the proposed tariffs and their repercussions could stoke trade war sentiments, dampening global investor sentiment and causing markets to become volatile. This could ultimately lead to sectoral rebalancing as investors focus more on companies better equipped to weather these storms.
Investor's Reading List
- FTSE's Biggest Runners: Springing Higher Throughout May: A list of this month's top-performing FTSE stocks.
- Understanding the Influence of Protectionist Tariffs on Global Trade : An in-depth analysis of tariffs' impacts on global trade scenarios by the Brookings Institution.
- The Role of Domestic Steel Tariffs in the US Economy: A CFA Institute paper exploring the economic effects of tariffs on the US steel sector and the broader US economy.
- Amid the proposed steel import tariff increase and geopolitical uncertainties, investors may want to scrutinize their stock portfolios, particularly companies within the automotive and construction sectors that could face higher input costs.
- For those interested in understanding how protectionist tariffs affect global trade, the Brookings Institution offers an in-depth analysis, providing insights into the repercussions of such policies.
- Additionally, one might find it beneficial to learn more about the potential economic impacts of tariffs on the US economy, as detailed in a CFA Institute paper focusing on the US steel sector.
- Lastly, as the FTSE 100 continues to defy the global market trend, keeping up with the month's top-performing FTSE stocks may prove advantageous when weighing options in mortgage investment or general finance-related businesses.
