Tariff row confuses Wall Street; Italian stocks rebound

Stocks on Wall Street astalled as the tariff controversy again takes centre stage in investors’ considerations.

Opposition from big business and many Republican legislators is building against proposed tariffs on steel and aluminium imports, which President Donald Trump says are bargaining chips for a better Nafta deal.

Nafta is the free trade agreement with Mexico and Canada, which is the largest exporter of steel and aluminium to the US.

At the close of trading in New York, the Dow Jones Industrial Average finished marginally up 9.36 points at 24,884.12, recouping losses after declining more than 150 points earlier in the session. 

The S&P 500 was up 0.3% to 2728.12, while the Nasdaq Composite rose 0.6% to 7357.

Expectations for escalating trade tensions have dragged down stocks around the world in recent sessions amid concerns about rising materials costs for companies and harm to global exporters.

But pushback from some senior Republicans helped soothe investor nerves.

“Our view is that it’s going to be really difficult to institute this kind of steel tax in perpetuity without some adjustments,” says Jeff Mills, co-chief investment strategist at PNC Financial Services Group..

Still, investors are keeping in mind the impact of trade tariffs, as well as worries about inflation, says Kate Warne, investment strategist for Edward Jones.

“I think tariffs will continue to be an issue for investors going forward because the major impact isn’t just what the US does,” she says. The rest of the world’s response to US tariffs is also something to think about, she adds.

Gains were broad, with nine of the 11 sectors in the S&P 500 posting advances.

Shares of consumer discretionary companies rose 0.7% in the S&P 500, with Legget & Platt rising 3.6% and Netflix 3.2%.

Meanwhile, the S&P 500 utilities sector fell 1.4%, among the biggest decliners in the broad index. Shares of FirstEnergy lost 2.4%, posting the steepest one-day percentage loss within the sector.

Italian market rebounds
The Stoxx Europe 600 was up 0.3%as Italian stocks and bonds rallied in the wake of the election result.

The FTSE MIB rose 1.9% to more than reverse Monday’s decline. Italy has entered a fresh period of political instability as voters backed populist parties but failed to produce a winner with enough support to patch together a parliamentary majority.

“It’s almost the worst outcome for markets that we could envisage: a long period of uncertainty ahead and it’s hard to see how a stable government can be formed,” says Richard Turnill, BlackRock’s global chief investment strategist.

Still, there is limited scope for the results to spill over into other European assets, and investors are already very familiar with Italian political uncertainty, he adds.

Germany’s export-heavy DAX rose 0.2% as shares of auto makers climbed. France’s CAC 40 marginally gained 0.06% and the UK’s FTSE 100 was up 0.4%.

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