Stocks struggle, gold at record high as trade fears weigh

LONDON (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 and Honda, while South Korea's Kopsi which includes Hyundai and Kia skidded 2%. [.T][EMRG/FRX]

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. [.EU]

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. [/FRX]

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 <DE10YT=RR, the euro area's benchmark of borrowing costs dropped 6 bps to 2.7%, their lowest level since March 5.

"It seems likely that the ECB will conclude that the downside risks from escalating trade tensions are materialising," said Christoph Rieger, strategist at Commerzbank.

In commodities, gold prices scaled a record peak on Friday as the threat of trade wars drives a rush towards the safe-haven metal. Spot gold was last up 0.77% at $3,079.5 per ounce. [GOL/]

Gold is up more than 17% in the first quarter of the year, heading for its best quarterly performance since 1986.

"Continued haven demand, coupled with EM central bank buying in an effort to diversify FX reserves, make for a convincing bull case here," said Michael Brown, senior research strategist at Pepperstone.

Oil prices eased a bit as traders assessed a tightening of crude supplies along with new U.S. tariffs and their expected effect on the world's economy. [O/R]

Brent crude futures were at $74 a barrel. U.S. West Texas Intermediate crude futures were at just under $70.

(Additional reporting by Ankur Banerjee in Singapore; Editing by Kim Coghill)