Trade worries roil stocks after initial help from oil price gains
REPORTS OF TRUMP THREAT TO RAISE TARIFFS ON CHINA SEND S&P CRASHING
US stocks fell on concern over global trade risks and disappointing factory data yesterday. The S&P 500 Index headed toward its biggest decline in almost two months on a report that President Donald Trump will increase tariffs on China if Washington and Beijing can’t reach a trade agreement. Equities also retreated after Trump said he’s restoring tariffs on steel and aluminum from Argentina and Brazil.
The latest tariff development outweighed bets that the world’s two largest economies were close to signing the first part of a trade deal. Meantime, an unexpected drop in US manufacturing showed the sector lacks momentum amid a stillsimmering trade war.
“It’s all part of the same narrative, right?” Tom Porcelli, chief US economist at RBC Capital Markets, told Bloomberg TV.
“There’s a narrative problem in the manufacturing space and the narrative problem obviously stems from trade. Until you actually can sign this deal, I think that manufacturing will remain under pressure.”
Earlier, global markets had been on the rise due to a jump in oil prices.
Oil output boost
Oil prices bounced back after slumping at the end of last week, with US West Texas Intermediate (WTI) crude jumping 1.9 per cent to $56.3 per barrel, with Brent crude futures rising 1.34 per cent to $61.3 a barrel.
Sentiment in the market got a boost from record high US crude production, expectations that Opec and its allies will extend existing oil output cuts when they meet this week, with Saudi Arabia calling for steady oil prices ahead of the listing of its state oil giant Saudi
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Aramco. “Opec+ is likely to roll over its existing oil production cut agreement at its upcoming meeting in December,” said
Edward Bell, commodity analyst at Emirates NBD.
“Deeper cuts would help move closer toward a balanced market but the scale of cuts required would mean a substantial slowdown in domestic economies,” Bell said. “Compliance with production cuts will remain an issue and we expect Saudi Arabia to again provide the bulk of output restraint.”
The analyst added that markets will end up in a surplus for 2020, with a “particularly heavy” over-supply seen in the first-half of next year, adding that he expected average prices for Brent at $57 a barrel and WTI at $55 a barrel.
Oil price gains helped push MSCI’s broadest gauge of world shares up 0.1 per cent, hovering near an all-time peak hit at the start of last year.
On the US-China trade front, investors continue to monitor for definite cues on the trade tiff. A report from news website Axios saying that tensions in Hong Kong had stalled Sino-US trade talks, citing a source close to the US negotiating team, was not enough to dent the sentiment.