In­vestors seek safety in gold and bonds

Sunday Star-Times - - BUSINESS -

US stocks sank more than 2 per cent yes­ter­day, the sec­ond day of steep de­clines around the globe driven by con­cerns about ris­ing in­ter­est rates and trade ten­sions.

The Dow Jones In­dus­trial Av­er­age dropped 546 points af­ter drop­ping 831 points the pre­vi­ous day. The two-day loss of 5.3 per cent is the big­gest for the Dow since Fe­bru­ary. The S&P 500 is also down more than 5 per cent over the two days and had de­clined for six straight days.

The sell­ing was wide­spread. En­ergy com­pa­nies sank along with oil prices and on­line phar­macy CVS led a rout in health care stocks.

Tech­nol­ogy com­pa­nies and re­tail­ers, in­clud­ing long­time mar­ket favourites Ap­ple, Al­pha­bet and Ama­zon, ex­tended their re­cent slide.

Seek­ing safety, in­vestors bought gold and gov­ern­ment bonds. That pushed prices up and yields down, end­ing a surge in yields that had touched off the mar­ket’s cur­rent de­cline. But in­vestors found more things to worry about.

There are con­tin­u­ing con­cerns about the un­re­solved trade dis­pute be­tween the US and China. Strong earn­ings re­ports in the com­ing weeks could soothe in­vestor nerves, but neg­a­tive com­ments from com­pany ex­ec­u­tives about fu­ture prof­its could have the op­po­site ef­fect. Re­cently a larger-than-nor­mal num­ber of com­pa­nies have warned that their third-quar­ter re­sults could be weaker than an­a­lysts ex­pected.

The bench­mark S&P 500 in­dex rose in morn­ing trad­ing, but ul­ti­mately gave up 2.1 per cent and closed at its low­est close in three months. The in­dex fell 3.3 per cent the pre­vi­ous day and has de­clined 6.7 per cent dur­ing its cur­rent los­ing streak – its steep­est down­turn since a 10-per cent drop in early Fe­bru­ary.

The Dow Jones In­dus­trial Av­er­age lost 2.1 per cent and the Nas­daq com­pos­ite fell 1.3 per cent.

Fri­day’s losses in the US fol­lowed steep de­clines over­seas. France’s CAC 40 and the Bri­tish FTSE 100 both sank 1.9 per cent and the DAX in Ger­many lost 1.5 per cent. Tokyo’s Nikkei 225 gave up 3.9 per cent and Hong Kong’s Hang Seng in­dex shed 3.5 per cent. The Kospi in South Korea fell 4.4 per cent.

Yes­ter­day, Trump re­newed his crit­i­cism of the Fed­eral Re­serve, blam­ing the re­cent down­turn in the stock mar­ket on the Fed’s rate pol­icy.

‘‘We have in­ter­est rates go­ing up at a clip that’s much faster than cer­tainly a lot of peo­ple, in­clud­ing my­self, would have an­tic­i­pated. I think the Fed is out of con­trol,’’ the pres­i­dent said to re­porters in the Oval Of­fice.

Trump said he had no in­ten­tion of fir­ing Jerome Pow­ell, who he ap­pointed as Fed chair­man in Fe­bru­ary.


Has the bub­ble burst? Trader James Lamb watches his screens on the floor of the New York Stock Ex­change.

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