Battered global stock markets closed down Friday after a second day of mass selling, this time sparked by China’s tariff retaliation against U.S. President Donald Trump’s worldwide trade war.
Despite short-lived rallies in the morning and afternoon, the S&P-TSX Composite — Canada’s main stock index — closed down 4.6 per cent, while the New York’s S&P 500 had lost nearly six per cent. The Dow Jones index saw one of its worst single-day losses, dropping 5.5 per cent, and the NASDAQ was off 5.8 per cent.
In the worst two-day rout since the height of the pandemic in 2020, the S&P 500 saw some $2.4 trillion in market cap evaporate.
Friday’s broad-based sell-off for the S&P-TSX Composite, which topped Thursday’s loss, made it the worst single-day for the index since June 2020.
Not surprisingly, Wall Street’s so-called ‘Fear Index’ soared.
The Chicago Board Options Exchange Volatility Index — usually referred to by its ticker symbol VIX and based on S&P 500 futures options trading — had jumped up 15.29 points to 45.31, a rise of 50.93 per cent, by closing. Friday’s increase surpassed Thursday’s, making it the highest the VIX has been since August 2020.
“It’s certainly a big deal given the large drop in markets,” Stephen Foerster, a finance professor at Western University’s Ivey Business School, said Friday. “The reality of the tariff impact is hitting home.”
This week’s losses aren’t near the biggest drops that preceded the Great Depression or the 1987 stock market crash, said Foerster, but plunging stock prices were the result of a “perfect storm” of fears over inflation, slowed economic growth, and even the prospect a global recession.
“If I had to summarize in a word what’s driving all of this, it’s uncertainty,” he said, referencing Trump’s unpredictable trade policies and other countries’ reactions. “It will take a while for the picture to be clear.”
Outside of North America, markets in Asia and Europe were closing out their weeks on low points — although some appeared to be faring better than others.
Japan’s Nikkei 225 dropped by 2.75 per cent Friday after a similar showing Thursday. But London’s FTSE 100 Index was down nearly five per cent at closing on Friday, compared to losing only 1.6 per cent the day before.
The continued market mayhem comes as China announced 34 per cent tariffs against the U.S. to match the rate Trump imposed as part of his sweeping “reciprocal” tariffs targeting both American allies and foes earlier this week. Canada was largely spared from these latest penalties, although were hit with a 25 per cent tariff on auto imports the U.S. president had put on pause.
Stocks for Chinese-based tech company Alibaba Group had led the drop in U.S. markets for most of the day, but was overtaken by Applovin Corp and GE Healthcare Technologies, which were closed down more than 16 and 15 per cent respectively.
Canada’s market losers were led by energy companies like Baytex Energy Corp, Suncor Energy and Ovintiv Inc. as global oil prices reached their four-year low.
The plummeting stocks also persisted despite latest labour market data coming out of the States that was more positive than expected.
Trump used the report — which found 228,000 jobs were added in March — to justify his latest tariffs in face of the sagging markets on Truth Social Thursday morning.
“GREAT JOB NUMBERS, FAR BETTER THAN EXPECTED,” he wrote, “IT’S ALREADY WORKING. HANG TOUGH, WE CAN’T LOSE!!!”
Investors and economists were not convinced, with U.S.-based firm J.P. Morgan upping its odds of both a U.S. and global recession to 60 per cent.
Jerome Powell, chair of the U.S. Federal Reserve, which sets the country’s interest rates, warned Trump’s tariffs would likely lead to higher inflation and slower economic growth in the States.
Douglas Porter, chief economist at BMO, suggested that the level of tariffs and counter-tariffs are unsustainable, and will lead to the trade war cooling off within six months.
Still, he added, that’s plenty of time for more chaos on the markets.
“Even six months of trade turmoil is a veritable lifetime for markets,” Porter said in a research note Friday.
Porter said that in the wake of Wednesday’s ‘Liberation Day’ announcement, tariffs on imports to the U.S. are now at an average rate which is higher than the infamous Smoot-Hawley regime in the 1930s, which most economists and historians agree helped pave the way for the Great Depression.
A BMO chart comparing the current tariffs with historical U.S. rates was titled simply “The Day That Globalization Died.”
Friday’s morning trading was worse for Canada compared to the day before. The loonie was also down slightly, sitting at 70 cents U.S. compared to 71 cents U.S. on Thursday.
While Vancouver-based certified financial adviser Kelly Ho understands that people are naturally feeling stressed by the state of the markets, she said that now is not the time to make any “rash” decisions around investments.
“For those who are invested properly,” which Ho said involves having a diverse portfolio and financial plan, “you shouldn’t be worried.”
If people don’t have a plan or are invested in one stock category, Ho recommended seeking professional advice or at least consulting with a trusted source.
“And trusted sources is not YouTube,” she continued, “I might actually look to investment companies that are putting out articles by people who are qualified and are factual and not opinion based.”
With files from Star wire services
