Just as it seemed that markets around the globe were reconciling themselves to higher bond yields, they were rattled by US President, Donald Trump saying that the US would impose fresh tariffs on aluminium and steel.
Fresh import tariffs
Donald Trump said on Thursday that the U.S. will impose tariffs of 25 percent for steel and 10 percent for aluminum. The tariffs will be implemented broadly, without targeting specific countries.
Indian metal stocks are likely to reacted to the news on Monday with the markets closed for Holi today. The imposition of tariffs may see strong retaliation from countries like China and the EU.
Nikkei falls 600 points
In Asia, the Japanese Nikkei fell a staggering 600 points. In the Japanese markets steel stocks reacted sharply. JFE Holdings fell 2.40 percent, Nisshin Steel lost 2.20 percent and Kobe Steel fell 2.60 per cent.
The imposition of duties many investors fear could result in a trade war, which would not be very good for the global economy.
Other markets like the Hong Kong's Hang Sang and the Korean Kospi both lost as much as 1.5 per cent on the news.
The SGX Nifty dropped by 74 points, suggesting that the Indian markets may open weak on Monday for trade.
Bond yields fall
A good thing for emerging markets like India was that bond yields in the US fell on fears that the tariffs would slow down the US economy and the Fed may reduce the pace of interest rate hikes.
Stock markets across the globe are sensitive to interest rate hikes across the world and tend to fall on rising bond yields as was seen in the month of Feb 2018. In fact, the Indian markets lost as much as 6 per cent in Feb 2018.
Sensex may fall below 34,000 points on Monday
Indian markets could not react to the imposition of tariffs as they were shut on account of Holi. However, the Sensex is likely to dip below the 34,000 points mark, when markets open for trading on Monday.
In all probability we may see a fall of 200 points on the Sensex.