Trade war concerns roil stocks; US yields ‘flatten’ on soft data

Oil prices pare gains; gold edges lower

NEW YORK, March 14, (Agencies): Simmering fears of a global trade war on Wednesday overshadowed robust data from China and kept government bond yields low in the US and Europe, with US stocks sinking into the red amid a drop in industrial shares.

Later on Tuesday, Reuters reported that the US was seeking to impose tariffs on up to $60 billion of Chinese imports.

The news contributed to a continued flattening on Wednesday of the US yield curve, a move also aided by a third consecutive monthly decrease in retail sales data.

The spread between five-year notes and 30-year bonds, an indicator of the shape of the yield curve, lowered to 44.9 basis points on Wednesday, 3 basis points below its last close.

Benchmark 10-year notes last rose 11/32 in price to yield 2.8079 percent, from 2.848 percent late on Tuesday.

In Europe, high-rated government bond yields edged higher but remained near recent lows. German 10-year government bond yields seesawed in midday trades, falling to a one-and-a-halfmonth low at 11:25 a.m. ET.

The Dow Jones Industrial Average fell 240.62 points, or 0.96 percent, to 24,766.41, the S&P 500 lost 11.3 points, or 0.41 percent, to 2,754.01 and the Nasdaq Composite dropped 20.44 points, or 0.27 percent, to 7,490.58.

The pan-European FTSEurofirst 300 index lost 0.10 percent and MSCI’s gauge of stocks across the globe shed 0.39 percent.

Emerging market stocks lost 0.49 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.34 percent lower, while Japan’s Nikkei lost 0.87 percent.

The Chinese data spurred an early spike for oil, before prices dropped later.

US crude fell 0.36 percent to $60.49 per barrel and Brent was last at $64.50, down 0.22 percent on the day.

In currencies, the dollar index rose 0.18 percent, with the euro down 0.26 percent to $1.2357.

The Japanese yen strengthened 0.38 percent versus the greenback at 106.17 per dollar, while sterling was last trading at $1.3928, down 0.22 percent on the day.

US

The Dow Jones Industrial Average fell more than 250 points, or 1 percent, on Wednesday as industrial stocks tumbled over growing fears of a trade war with China after President Donald Trump sought to impose fresh tariffs.

The S&P industrial stocks were again the worst hit, falling 1.02 percent. Boeing tumbled 3.5 percent, leading the losers and wiping off 70 points from the Dow Industrials.

The uncertainty over the latest news was weighing on stocks, said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Concerns about a trade war have also been fanned by uncertainty in the White House after the exit of Gary Cohn, a strong free trade proponent and sacking of Secretary of State Rex Tillerson, a moderate, on Tuesday.

At 12:38 pm ET, the Dow was down 225.29 points, or 0.9 percent at 24,781.74 and the S&P 500 fell 0.32 percent at 2,756.56.

The Nasdaq Composite was up 0.01 percent at 7,511.56, with a bump in technology stocks helping the index.

Also weighing on sentiment was data that showed US retail sales fell for a third straight month in February, pointing to a slowdown in economic growth in the first quarter.

But the data helped cool concerns of the Federal Reserve raising interest rates at a faster pace in 2018.

Financial stocks fell 0.7 percent, tracking a decline in US bond yields.

Among stocks, Signet Jewelers fell more than 18 percent after the company gave a disappointing full-year earnings forecast.

Qualcomm fell about 2 percent after Broadcom formally withdrew its bid. Broadcom shares dipped 0.9 percent.

Among gainers, Ford rose 3.5 percent after Morgan Stanley doubleupgraded the stock to “overweight” and raised its earnings estimate on the automaker.

Declining issues outnumbered advancers on the NYSE by 1,585 to 1,215. On the Nasdaq, 1,661 issues fell and 1,148 advanced.

UK

British shares gave up early gains and finished in negative territory on Wednesday as points gained by Prudential and mining stocks were overturned by simmering fears of a global trade war that pushed Wall Street into the red.

The blue chip FTSE 100 index closed down 0.09 percent at 7,132.69 points, slightly above the pan-European STOXX 600, down 0.15 percent while the Dow Jones Industrial Average was losing about 1 percent at the same time.

“The positive mood in Europe has waned after US markets turned lower,” David Madden from CMC Markets said.

The showdown between Britain and the Kremlin about how a Sovietera nerve toxin was used to attack a Russian ex-spy had little impact on British shares.

Insurer Prudential was the top gainer, its shares rising 5.1 percent after it said it would demerge its UK and Europe retirement and asset management business from its international insurance business.

It said it planned to demerge M&G Prudential into a separate company with a premium listing on the London Stock Exchange.

“A demerger driven by geography is one which makes commercial and strategic sense,” Richard Hunter, head of markets at Interactive Investor, said.

Mining stocks provided a big boost to the FTSE, thanks to some solid industrial production data from China, which pushed metals prices higher given that China is the biggest consumer of metals in the world.

Shares in Glencore were up 1.8 percent, Anglo American added 3.3 percent and Antofagasta rose 3.4 percent.

Results were also in focus. Despite an early rise, shares in Morrison’s gave up gains and posted the worst performance of the index, down 4.8 percent after the supermarket gave a full-year update amid a tough environment for food retailers due to competition in pricing and online.

While Morrison’s beat forecasts and announced a special dividend, analysts voiced concerns over the sustainability of the grocer’s growth, while others were disappointed that the dividend was a one-off.

Outside of the blue chips, shares in funeral services provider Dignity surged more than 15 percent, putting the stock on track for its biggest oneday gain since listing in 2004 after reporting full-year results.

Dignity’s shares are still down more than 45 percent this year on the back of concerns around a price war.

Asia

Asian markets tumbled on Wednesday as news that Donald Trump had replaced his moderate secretary of state with a hawk fanned fears of instability in the White House and a more hardline approach to foreign affairs.

All three main US markets ended lower and Asia followed suit.

Tokyo fell 0.9 percent, while Hong Kong shed 0.5 percent and Shanghai sank 0.6 percent.

Sydney lost 0.7 percent, Singapore fell 0.5 percent and Seoul was off 0.4 percent while Wellington, Manila and Taipei also fell. -Key figures around 0820 GMTTokyo — Nikkei 225: DOWN 0.9 percent at 21,777.29 (close)

Hong Kong — Hang Seng: DOWN 0.5 percent at 31,435.01 (close)

Dollar/yen: DOWN at 106.50 yen from 106.56 yen.

Oil

Oil was slightly higher on Wednesday after strong Chinese factory activity, though concern over the pace of growth in US output, as well as other producing nations, limited gains.

The Organization of the Petroleum Exporting Countries said in its monthly report it expects supply from nonmembers to grow more quickly than it had previously expected.

The group also reported the first increase in oil inventories across the world’s most industrialised nations in eight months in January, a sign the impact of its coordinated output cuts may be slowly waning, and cut its forecast for demand for its own crude.

Brent crude oil futures were last up 2 cents at $64.66 a barrel by 1410 GMT, while US West Texas Intermediate (WTI) futures were up 11 cents at $60.82 a barrel.

OPEC cut its forecast for demand for its own crude in 2018 by 250,000 bpd to 32.61 million bpd, marking the fourth consecutive decline.

Earlier in the day, oil prices got a boost from a broader investor push into commodities after Chinese data showed the world’s largest importer of raw materials saw industrial production grow more than expected over the first two months of the year.

ING commodities strategist Oliver Nugent said the Chinese industrial output was “reinforcing that bullish narrative” across the commodities market, including oil.

The oil price is still showing a 1 percent loss so far this week as concern grows about the ability of OPEC and its partners to counter rapid growth in US crude production, which is tipped to hit a record 11 million bpd before the end of the year.

Gold

Gold prices edged lower on Wednesday, pressured by a recovering dollar but supported by safe-haven buying after the sudden dismissal of US Secretary of State Rex Tillerson.

Spot gold was down 0.2 percent at $1,323.87 an ounce at 1500 GMT. It earlier touched $1,330.02, its highest since March 7.

US gold futures for April delivery were 0.2 percent lower at $1,324.20 an ounce.

Technical Fibonacci support for gold was at $1,317.20 an ounce with resistance at $1,336.30, said analysts at ScotiaMocatta in a note.

Gold is seen as a safe haven during times of political and financial uncertainty and benefited on Tuesday when President Donald Trump fired Tillerson after a series of public rifts over policy, replacing him with loyalist CIA Director Mike Pompeo.

Investors have switched to become more risk averse following the unexpected news of Tillerson’s dismissal and the appointment of Pompeo, said OCBC analyst Barnabas Gan.

The US dollar inched higher against major currencies, recovering from a decline caused by the dismissal of Tillerson.