Global equities tumble as US and China escalate trade war
All 3 major US indexes post 4th straight weekly declines
NEW YORK, Aug 24, (RTRS): Stocks fell on Friday while safe havens rose after President Donald Trump demanded US companies look at alternatives to China for manufacturing, following Beijing’s retaliatory tariffs on American goods.
China’s Commerce Ministry said in a statement early on Friday it would impose tariffs on about $75 billion in imports from the United States including some agricultural products, crude oil and small aircraft.
Stocks that benefit during economic expansions fell the most on Wall Street, also hinting at recession concerns.
The Dow Jones Industrial Average fell 623.34 points, or 2.37%, to 25,628.9, the S&P 500 lost 75.84 points, or 2.59%, to 2,847.11 and the Nasdaq Composite dropped 239.62 points, or 3%, to 7,751.77.
The pan-European STOXX 600 index turned sharply lower after Trump’s tweets, dropping 1% in the last half hour of trading to close down 0.78%, while MSCI’s gauge of stocks across the globe dropped 1.57%.
Emerging market stocks lost 0.20%, an index of Latin American shares dropped more than 3% to close at its 2019 low and US dollar-denominated Nikkei futures fell 2.0%.
Trump’s comments came after Federal Reserve Chair Jerome Powell said the US central bank will “act as appropriate” to keep the economic expansion on track, but noted rising risks.
Powell’s remarks had given markets some relief after the overnight announcement from Beijing. Trump’s tweeted response to the speech asked who is “our bigger enemy” between Powell and China’s President Xi Jinping.
The two-year/10-year yield curve inverted last week for the first time since 2007, a signal that a US recession is likely in one to two years. The curve has traded in and out of inversion over the past three days.
US Treasury yields fell, with 10-year notes last up 22/32 in price to yield 1.5351%, from 1.61% late on Thursday.
US
Wall Street tumbled on Friday after the US-China trade war escalated in dramatic fashion, with President Donald Trump demanding that American companies seek alternatives to doing business with China after Beijing announced its own slate of retaliatory measures.
All three major US stock indexes ended the session sharply lower, posting their fourth consecutive weekly declines.
The latest exchanges in the longrunning tariff row triggered a broadbased sell-off that hit shares of companies with high exposure to China the hardest, such as chipmakers and other top technology names. Dow Jones Industrials components Intel Corp and Apple Inc dropped 3.9% and 4.6%, respectively.
The escalating US-China trade dispute has emerged as a major tripping point for the market in recent weeks. Friday marked the third decline of more than 2% for the S&P 500 so far in August, and the benchmark index has now shed 5.8% in the last four weeks.
Yields for 2-year and 10-year US Treasuries entered inversion territory, a classic recessionary red flag. The curve has traded in and out of inversion for the past three days.
The Dow Jones Industrial Average fell 623.34 points, or 2.37%, to 25,628.9, the S&P 500 lost 75.84 points, or 2.59%, to 2,847.11 and the Nasdaq Composite dropped 239.62 points, or 3%, to 7,751.77.
All 11 major sectors in the S&P 500 ended the session in negative territory. Energy and technology were the biggest percentage losers, both sliding more than 3%.
UK
London’s FTSE 100 fell on Thursday as the latest signals from the US Federal Reserve dampened hopes of hefty interest rate cuts, while exporter stocks slipped as the pound rose after German Chancellor Angela Merkel’s comments on the Brexit deal.
The FTSE 100 shed 1.1%, while the FTSE 250 was roughly flat.
Companies that book a major chunk of their earnings in dollars, including Diageo and Unilever dropped after Merkel said a solution to the Irish border problem could be found before Britain leaves the European Union on Oct 31. Her comments lifted sterling to a three-week high against the dollar.
BAT gave up 1.5%, hit by the gains in sterling as well as a probe by a US House panel into e-cigarette manufacturers over the health impact of their products. Imperial Brands lost 2.7%, as the stock also traded ex-dividend.
UAE-based healthcare provider NMC Health was the standout performer, surging more than 18.5% for its best day ever, after sources told Reuters that two groups, including one backed by China’s Fosun, were competing to buy a 40% stake in the company worth up to $1.9 billion.
The company also posted half-year results and announced plans to buy back up to $200 mln worth of shares.
Losses on the main index were spread across sectors after Fed minutes overnight showed policymakers were deeply divided on an interest rate cut, at a time when many investors are looking to central banks to help cushion blows from a bruising US-China trade dispute.
Europe
European shares fell on Friday after US President Donald Trump furiously reacted to China’s latest imposition of tariffs on certain US goods, while a lack of direction in the US central bank’s rate outlook somewhat frustrated investors.
In a surprise move Beijing imposed additional tariffs on thousands of US products effective Sept 1, infuriating Trump who hit back asking US companies to start looking for alternatives to their China operations.