LONDON: Stock markets wobbled Friday as US President Donald Trump eyed further tariffs even as roadblocks emerged on striking a key trade deal with Canada.
A report that Trump is planning to impose tariffs on a further $200 billion of Chinese imports as soon as next week jolted trading floors.
At the same time, European Commission chief Jean-Claude Juncker on Friday warned that the European Union would hit back with tariffs of its own should Trump make good on threats to slap duties on foreign cars, as cracks emerged in an EU-US trade truce.
And in an interview with Bloomberg, Trump threatened to pull the United States out of the World Trade Organization if it does not "shape up".
Against this backdrop, foreign exchange traders dumped emerging market currencies after Argentina's peso became the latest to hit the buffers on concerns about the country's economy.
Markets meanwhile digested news also that inflation in the eurozone slowed to two percent in August as high oil prices fell back slightly.
On the corporate front, Coca-Cola said it had agreed to buy international coffee chain Costa for $5.1 billion from its UK owner Whitbread, in a deal that gives the beverages behemoth its first global coffee brand.
Shares in leisure group Whitbread surged more than 14 percent on London's benchmark FTSE 100 index, while those in Coca-Cola slid 0.3 percent in New York.
However, "even the Coca-Cola glow emanating off of Whitbread couldn't prevent the FTSE sliding," said Connor Campbell, analyst at Spreadex traders.
"There had been some hopes the US signing a trade deal with Mexico earlier in the week meant things were perhaps moving in the right direction.
"However, with reports that Trump is looking to impose additional tariffs on China, his threat to pull the US out of the WTO and the tense, terse situation with both the EU and Canada, the markets are back to fretting about his next move," Campbell added.
With Trump needing to send notification to Congress on Friday about whether an update to NAFTA has been secured, negotiations appeared to hit last minute roadblocks over Canada's dairy market.
- Currency woes -
Elsewhere, attention was firmly on Argentina, whose peso currency hit a record low near 40 to the dollar on Thursday.
Even if it made slight gains against the dollar, the peso has still lost more than 50 percent of its value since the start of the year as the government of President Mauricio Macri faces a financial catastrophe.
Turkey's lira also ticked higher after the government made it more expensive to hold foreign currency savings, a day after heavy selling following the resignation of a deputy central bank governor. The currency has lost more than 40 percent of its value this year.
The flight out of emerging market units hit India, where the rupee fell to 71 against the dollar for the first time. The embattled currency has lost about 10 percent this year.
And the Indonesian rupiah also dived, briefly hitting the 14,750 to the dollar mark seen during the Asian financial crisis in 1998.
Both Asian countries' problems have been exacerbated by ballooning current account deficits, while a series of interest rate hikes has failed to staunch the selling in their currencies.
"The spillover from the resurfacing emerging-market turmoil in the Argentina peso and Turkish lira is weighing on EM Asia currencies," said Ken Cheung, senior FX strategist at Mizuho Bank in Singapore.
On Wall Street, the Dow and S&P 500 tipped in and out of positive territory in morning trading.
"US investors appear much more sanguine about the risks of a $200 billion escalation in the China-US tariffs than their counterparts in Europe and Asia," said Michael Hewson, chief market analyst at CMC Markets UK.
In Europe, equities ended sharply lower.
London dropped 1.1 percent, Frankfurt shed 1.0 percent and Paris fell 1.3 percent.
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