European and US stocks slide, oil prices rally

European and US equity markets took a step lower on Tuesday on valuation concerns and worries about renewed US-China trade tensions. Meanwhile oil prices rallied on the prospect of renewed travel in the US and Europe, and the dollar firmed looking ahead to key US jobs data later in the week.

Traders are awaiting the release Friday of US jobs data for April, with some observers suggesting around one million positions created, but in the meantime investors worried about valuations and renewed US-China trade tensions.

With equities sitting around record or multi-year highs after a more than year-long rally, there is a feeling that they are in store for a small correction soon, before resuming their upward march.

The flip side of the blockbuster earnings reported by many companies has been warnings about rising prices, which has sparked concern among investors that the US Federal Reserve will need to raise interest rates sooner than expected.

Fed Chief Jerome Powell has sought to reassure markets that a brief surge in inflation won’t cause it to taper its stimulus and raise rates.

After European markets closed the EU said it was suspending efforts to ratify the investment deal it agreed with China late last year.

There were few catalysts to drive business on Asian stock markets, with Tokyo and mainland China’s bourses closed for holidays.

However, Hong Kong stocks rose a day after data showed the financial hub had finally escaped recession following seven quarters of contraction caused by the pandemic and the 2019 democracy protests.

In Europe, the main indices all ended the day down, with Frankfurt tumbling 2.5 per cent as all stocks on the DAX 30 finished lower with industrial and tech companies suffering the greatest falls.

Wall Street’s main indices were lower in late morning trading, with the Nasdaq down 2.5 per cent as tech stocks took a beating.

Oil prices extended Monday’s rally -- hitting seven week highs -- with traders hopeful for a resumption of travel in the coming months.

US TRADE DEFICIT: The US trade deficit jumped to a record high in March amid roaring domestic demand, which is drawing in imports, and the gap could widen further as the nation’s economic activity rebounds faster than its global rivals.

Manufacturers lack the capacity to satisfy the surge in demand because of resource constraints and bottlenecks in the supply chain. Inventories are very lean. Demand is being driven by a rapidly improving public health situation and massive government aid to households and businesses to cushion the blow from the COVID-19 pandemic. The trade deficit increased 5.6% to an all-time high of $74.4 billion in March, the Commerce Department said on Tuesday. The trade gap was in line with economists’ expectations.

Imports soared 6.3% to a historic $274.5 billion in March. Goods imports shot up 7.0% to $234.4 billion, also an all-time high. Imports of consumer goods were the highest on record, as were those for food and capital goods.

The nation imported a range of goods including apparel, furniture, toys, semiconductors, motor vehicles, petroleum products and telecommunications equipment. But imports of civilian aircraft and cellphones fell.

The government has provided nearly $6 trillion in pandemic relief over the past year. Americans over the age of 16 years are now eligible to receive the COVID-19 vaccine. Demand during the pandemic shifted to goods from services, with Americans cooped up at home. The economic boom is also being boosted by the Federal Reserve’s ultra-easy monetary policy stance.

Stocks on Wall Street were trading lower. The dollar rose versus a basket of currencies. US Treasury prices were higher.

The bulk of imports in March came from China, boosting the politically-sensitive goods trade deficit with Beijing to $27.69 billion from $24.62 billion in February, reversing a tariffs-driven improvement during the Trump administration.

“The widening in the trade balance with China over the last few months has erased the tightening that occurred over 2019 as a result of tariffs,” said Veronica Clark, an economist at Citigroup in New York.

Imports from Mexico hit a record high in March, as did those from South Korea.

Exports accelerated in March, but continued to lag the growth in imports. Exports surged 6.6% to $200.0 billion. Exports of goods vaulted 8.9% to $142.9 billion.