Boeing, Apple lead slide as China-US spat intensifies

Dollar slides, oil slips and gold jumps

NEW YORK: Boeing and Apple led a slide in big U.S. manufacturers and technology companies yesterday, bearing the brunt of a deepening trade conflict between China and the United States. China and the United States announced tariffs on $50 billion of each others’ imports. But, while Washington’s list covers many obscure industrial items, Beijing’s covers 106 key US imports including soybeans, planes, cars, and chemicals. The speed with which the trade struggle between the two countries is ratcheting up - China took less than 11 hours to respond with its own measures - led to a sharp selloff in global stock markets and commodities.

At 9:44 am ET, the Dow Jones Industrial Average was down 399.81 points, or 1.66 percent, at 23,633.55. The S&P 500 fell 28.57 points, or 1.1 percent, at 2,585.88 and the Nasdaq Composite was down 75.51 points, or 1.09 percent, at 6,865.77.

The S&P opened and stayed below its 200-day moving average, a key support level watched by traders technical analysts, while the Dow held just above that mark. The Nasdaq dipped into negative territory for the year. “Tariffs by themselves and an escalating trade war would certainly have deleterious effects on just about everything,” said Jack Ablin, chief investment officer at Cresset Wealth in Chicago.

The declines were broad based. All 30 Dow components were lower. About 469 of the S&P 500 components were lower. The industrials index’s 1.8 percent slide was the most among the 11 major S&P sectors, as has been the case since the trade war fears surfaced.

Shares of Boeing, the single largest U.S. exporter to China, tumbled 4 percent. Caterpillar fell 3 percent. Ford, General Motors, Fiat Chrysler and Tesla fell between 0.8 percent and 1.88 percent. While manufacturers were the bigger losers as a group, the technology sector’s 1.74 percent drop weighed the most on the market.

Major tech names Apple and the FANG group Facebook, Amazon, Netflix and Alphabet were down between 1.4 percent and 2.6 percent.

Chipmakers, many of which have the highest revenue exposure to China among S&P 500 companies, also fell. All components of the Philadelphia chipmakers index were lower, led by AMD’s 5 percent drop. “As a sector, technology has the most to lose from a world in which global trade is restricted and of course, some of the subjects of the tariffs, will also be hit,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Among the few bright spots was Lennar, whose shares jumped 6.2 percent after the homebuilder’s quarterly revenue beat estimates as it sold more homes at higher prices.

Declining issues outnumbered advancers by a 9.42to-1 ratio on the NYSE and a 5.74-to-1 ratio on the Nasdaq. In Europe, London’s FTSE, Paris’s CAC40 and the export-heavy German DAX fell between 0.6 percent and 1.2 percent. “The market should be focused on it because it’s (U.S. protectionist measures are) bad news,” fund manager Ashmore’s head of research, Jan Dehn, said.

Trump denied yesterday that the United States was in a trade war with China. The Organisation for Economic Co-Operation and Development’s head Angel Gurria said the US exports $150 billion of goods a year to China whereas China exports $500 billion to the US, meaning China’s tariffs were therefore not proportional.

The swing in risk sentiment put the pep back into bonds, with yields on US 10-year Treasury debt down three basis points at 2.75 percent. Borrowing costs also nudged lower in Europe even as the first March reading on euro zone inflation, important data for markets as the European Central Bank looks to wind down its massive monetary stimulus, came in firm at 1.4 percent.

Benchmark Bund yields slipped back under 0.50 percent , just off 2-1/2 month lows hit last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan had spent most of its session dithering either side of flat before ending 0.3 percent lower. China’s retaliation came after trading hours for Japan’s Nikkei, which added 0.2 percent in thin volumes and Chinese blue chips ended down 0.2 percent. South Korea saw the big move, dropping 1.4 percent.

Emerging market stocks, which have proved resilient to trade tensions, tumbled 1.6 percent and turned negative on the year. EMini futures for the S&P 500 were also pointing to New York opening between 1.5 percent and 1.8 percent down. Boeing shares fell 7.2 percent in pre-market trading. China’s duties on major U.S. imports included aircraft.

Factories fade

The dollar dropped to 106.14 yen, after edging up from a low of 105.70 on Tuesday. The euro hovered at $1.2287 , after easing from a high of $1.2335 overnight, while the dollar index was 0.2 percent lower at 90.

“It is not our view to expect risk aversion to sustainably rise, even though nervousness is indeed high,” Credit Agricole currency strategist Manuel Oliveri said in the Reuters Global Markets Forum. The Mexican peso and Canadian dollar both held firm after hitting a nearly five-month and five-week highs respectively in recent days on growing optimism about the prospect of a NAFTA trade deal.

Investors also seemed to be keeping their nerve on the global economic outlook after a host of manufacturing surveys (PMIs) showed some slowing, but from lofty levels in many regions. Activity in Japan’s service sector also grew at its slowest pace in 17 months last month, British shop prices dropped at the fastest pace for more than a year while Australian February building approvals fell 6.2 percent.

“If global PMIs slow and avoid overheating concerns, that is good for risk appetite. If they slow for ‘the wrong reasons’ like trade protectionism, that is much more worrying,” Deutsche Bank global strategist Alan Ruskin said. “The March data is at the most a very early warning shot for policymakers not to get too complacent on global growth resilience,” he said.

Trade wars were a particular concern for developing Asia, where South Korea, Taiwan, Thailand, China, Indonesia, and India reported a slowing in factory activity.

In commodity markets, gold jumped 0.85 percent to $1,343 an ounce, recovering some of Tuesday’s losses. Oil prices slipped with Brent crude futures off 97 cents to $67.14 a barrel, while U.S. crude fell 98 cents to $62.51 a barrel. —Reuters