Investors drag Wall Street down over tariff fears

Good morning. Today we’ll starting with the stock sell-off overnight in New York. Here’s what else is on the agenda for today:

• China’s retaliatory tariffs on US goods

• Russia’s shadow war in the Baltics

• A woman’s guide to wearing ties

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Wall Street stocks tumbled yesterday, as a sell-off triggered by investor concerns over the impact of President Donald Trump’s policies on the US economy intensified.

The S&P 500 index lost 2.7 per cent, after falling 3.1 per cent last week in its worst weekly performance in six months, as big US banks ditched their previous bullish forecasts for stocks this year.

The Nasdaq Composite sank 4 per cent, its worst day in two and a half years. The tech-heavy index is down more than 13 per cent from its December peak, leaving it in correction territory.

“This big sell-off feels ugly, it feels nasty,” said Drew Pettit, an equity strategist at Citigroup. “We were coming off very high sentiment and very high growth expectations. All of this is just recalibrating to the new risks that are in front of us,” he said, referring to worries about the health of the US consumer and Trump’s aggressive trade policy.

The latest falls, which also dragged down markets in Europe and Asia, came after the president on Sunday declined to rule out a recession or a rise in inflation as he dismissed business concerns over lack of clarity on his tariff plans.

Read more on the stocks that were hardest hit.

Here’s what else we’re watching today:

• Japan GDP: Revised Q4 figures will be released this morning.

• National People’s Congress: The annual session for China’s top legislature concludes today. Votes are expected on a variety of resolutions.

• Ukraine peace talks: UK Prime Minister Sir Keir Starmer told Trump he wanted to see “positive” talks between top US and Ukrainian officials in Saudi Arabia as they prepare to meet today.

• Thames Water: The beleaguered water company has a High Court hearing over the £3bn restructuring plan proposed by its parent company.

Five more top stories

1. China has introduced retaliatory tariffs on about $22bn of US goods, including agricultural exports in a move that targets Trump’s rural base. Farm goods including soyabeans, corn and chicken will be hit with additional levies of 10-15 per cent. Read more on the escalating trade war between the world’s two largest economies.

2. KPMG bosses are demanding dozens of mergers among its national partnerships in a move they hope will boost growth and prevent audit scandals, according to people familiar with the matter. The effort to more closely integrate the businesses, which are separately owned by the partners in each country, amounts to one of the biggest overhauls of a Big Four network in years.

3. China’s Geely has sold its majority stake in Denmark’s €1.6bn Saxo Bank to Swiss private bank J Safra Sarasin. The deal ends an eight-year joint venture that bet on Chinese capital markets opening up to the west. The 180-year-old J Safra Sarasin acquired Geely’s 49.9 per cent stake in Saxo Bank and Finland’s Mandatum’s 19.8 per cent, in a deal worth about €1.1bn. Read the full story.

4. Former Barclays chief Jes Staley came out fighting in his battle with UK authorities over his ties to the late sex offender Jeffrey Epstein, after the bank’s chair told a London court that his view of the pair’s relationship had changed. In statements published yesterday, Staley, 68, accused regulators of “destroying” his reputation as he sought to overturn the ban and fine that the Financial Conduct Authority had imposed on him.

5. Some of the world’s largest banks and fintechs are rushing to launch their own stablecoins, aiming to grab a slice of a cross-border payments market they expect will be redrawn by cryptocurrencies. Last month, Bank of America signalled it was open to issuing its own coin. Here are the other established payment services providers targeting the business.

Visual story

Criss-crossed by about 1,500 large vessels at any one time, the Baltic Sea is a crowded maritime route and a trade corridor for both Europe and Russia. But its network of communication and power cables has made it an attractive target for what appears to be a recent rise in “hybrid warfare”. Now, a spate of suspected sabotage incidents has put Nato on high alert, and exposed the vulnerability of Europe’s undersea infrastructure.

We’re also reading and listening to . . .

• Has China’s economy run out of gas?: On The Economics Show podcast, Martin Wolf speaks with economist Keyu Jin, who argues that China remains widely misunderstood in the west.

• US-Iran nuclear talks: Masoud Pezeshkian’s election in Iran appeared to herald an opportunity to engage with Washington on sanctions relief in exchange for a deal on the country’s nuclear programme. His plan is now in tatters.

• Global economy: Financial stress is forcing reform and recovery in many overlooked countries, writes Ruchir Sharma.

Chart of the day

Chinese vehicle exports to Russia last year hit seven times the level of 2022 as sanctions over the war in Ukraine cut the country off from western brands, according to the China Passenger Car Association. Now, Russia is looking to curb a flood of Chinese vehicle imports as it tries to step up local production. Earlier this year Moscow raised “recycling fees” — in essence tariffs — to Rbs667,000 ($7,500) for most passenger cars.

Take a break from the news . . .

On the catwalks, ties have been making a quiet comeback in women’s fashion. Billie Eilish, who regularly sports an oversized shirt and tie combo, and Michelle Pfeiffer in the current Saint Laurent campaign, have helped make it the “ultimate cool-girl accessory”. Don’t know how to style it? Fear not, FT’s Sara Semic has written a woman’s guide for wearing ties.