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Tariff worries see stocks struggle

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Gold scores fresh record high, oil slips

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Bond markets increasingly pricing in recession risks

By Marc Jones

LONDON, March 28 (Reuters) - Asian and European stock

markets extended losses on Friday while safe-haven gold notched

another record high, as the latest tariff salvo from U.S.

President Donald Trump stoked worries of an all-out trade war.

Oil and the dollar were also struggling, as Trump's 25%

tariffs on auto imports due to kick in next week alongside plans

for much broader global levies continued to draw fierce

criticism from both countries and companies.

Japan's Nikkei fell nearly 2% in Asia, led by sharp

drops in auto giants Toyota ( TM ) and Honda ( HMC ), while

South Korea's Kopsi which includes Hyundai

and Kia skidded 2%.

Europe's STOXX 600 index edged down, too, with the

car and auto parts sector set for a 2% weekly drop and

its sixth straight week of falls.

State Street's head of global macro strategy Michael

Metcalfe said that U.S. car tariffs had been more aggressive

than expected, especially as there had been no adjustments made

for its neighbours like Mexico and Canada.

"What I don't know is whether the hawkishness of the auto

tariffs is going to translate to the broader tariffs that we are

going to get next week," Metcalfe said. "And that is keeping

risk appetite on the back foot."

Some car firms, including Volvo, Volkswagen's

Audi, Mercedes-Benz and Hyundai

, have already said they will relocate portions of

their production. Ferrari, which makes all of its cars

in Italy, said it would raise prices by up to 10% on some

models.

Hong Kong's Hang Seng index fell 0.6% as traders

awaited clarity on Trump's tariff plans for China. Trump said he

would be willing to reduce tariffs on China to get a deal done

with TikTok's Chinese parent ByteDance to sell the popular app.

The focus is now on reciprocal tariffs the U.S. is due to

announce on April 2. Trump indicated the measures on what he has

dubbed 'liberation day' may not be the like-for-like levies he

has been pledging to impose.

"Not surprisingly, the tariff talk is resulting in another

round of risk-off," said Thierry Wizman, global FX & rates

strategist at Macquarie, as tariffs are likely to be both

"growth-restraining and inflation-producing".

INFLATION TEST

In currency markets, the U.S. dollar was steady ahead of an

inflation report later in the day.

The U.S. Personal Consumption Expenditures data, the Federal

Reserve's preferred gauge for prices, for February is expected

to show a rebound in consumer outlays and annual core PCE prices

heating up to 2.7%.

Many analysts had predicted the dollar would do well this

year due to Trump's 'America first' policies. It has been the

opposite however with the currency currently having its worst

start to a year since the 2008 global financial crash.

The euro has been one of the big beneficiaries of

the greenback's struggles. It inched down to $1.077 on Friday as

German consumer confidence data highlighted the ongoing

uncertainties in Europe's largest economy but it remains firmly

higher for the year.

The yen was stronger on the day at 150.675 per

dollar, on course for a near 4% gain against the dollar in the

quarter that has been helped by signs the Bank of Japan will

hike interest rates again.

Those expectations got further support on Friday as data

showed core consumer inflation in Tokyo had accelerated in

March.

DBS strategists expect near-term consolidation for the yen,

which they believe is caught between trade risks and firming

inflation.

Money markets, meanwhile, increased bets on future European

Central Bank rate cuts due to the tariff strains and after March

inflation data from France and Spain came in lower than

anticipated.

Traders now priced in an 80% chance of a 25 basis points

(bps) ECB rate cut in April from around 50% a week ago. German

Bund yields