Markets flounder in spin cycle

The fact is that no one actually knows what is next for the markets. However, the signs flashing from the markets are not great fiona Cincotta, Senior market analyst at City Index US-China trade tensions have metastasised into something more sinister by affecting global growth to such a large degree Stephen Innes, Managing partner at VM Markets

london — European stock markets lost ground again Thursday as investors all but gave up hope that a US-China trade war could be nearing its end, while US equities nervously traded sideways.

“Every time investors find the strength to pick themselves up off the floor, the trade war delivers another blow and knocks them down again,” said Craig Erlam at Oanda.

“US-China trade tensions have metastasised into something more sinister by affecting global growth to such a large degree that bond markets are pricing-in a high probability of a worldwide recession,” warned Stephen Innes, managing partner at VM Markets.

The pound climbed against the dollar and euro as data showed British retail sales rose unexpectedly by 0.2 per cent in July.

In Europe, London’s FTSE 100 closed down 1.1 per cent. Frankfurt’s DAX 30: dropped 0.7 per cent, while Paris’ CAC 40 fell 0.3 per cent.

Asian bourses were mixed. Tokyo’s Nikkei 225 closed down 1.2 per cent, Hong Kong’s Hang Seng rose 0.8 per cent, the Shanghai Composite was up 0.3 per cent and Australia’s S&P-ASX 200 dived 2.8 per cent. India’s Sensex closed up 1 per cent.

On Wall Street, the S&P 500 was up 0.5 per cent, as of 12:08pm ET after flipping between a loss of 0.2 per cent and a gain of 0.6 per cent through the morning. A day earlier, it plunged 2.9 per cent. The Dow Jones Industrial Average rose 125 points, or 0.5 per cent to 25,604, and the Nasdaq composite rose 0.3 per cent.

“The countdown to a recession has just started,” said Hussein Sayed, chief market strategist at FXTM.

The worries have pulled the S&P 500 down 4.4 per cent so far this month, while other markets are down even more sharply. The S&P 500, though, remains within 6 per cent of its record set late last month. “The fact is that no one actually knows what is next for the markets,” said Fiona Cincotta, senior market analyst at City Index.

“However, the signs flashing from the markets are not great.”

Oil prices fell more than 1 per cent on Thursday, extending the previous session’s 3 per cent drop. Brent crude fell as much as $1.81, or 3 per cent, to $57.67 a barrel. The international benchmark was $1.23, or 2.1 per cent, lower at $58.25 and West Texas Intermediate crude (WTI) was down 75¢, or 1.4 per cent, to $54.48 by 1632GMT.

Gold prices edged higher. Spot gold was up 0.3 per cent at $1,519.97 per ounce by 1633GMT, while US gold futures rose 0.2 per cent at $1,530.90. At the day’s peak of $1,523.91 per ounce, gold was back to within $11 of Tuesday’s sixyear high.

Weeks of pro-democracy protests in Hong Kong have added to the uncertainty, with Beijing referring to increasingly violent demonstrations as “terrorism”, stoking fears of a Chinese crackdown. Economists have warned for months that trade tensions threatened investment and dampened global sentiment, which was already suffering owing to China’s economic slowdown and fears over Brexit’s impact on Britain and Europe, where the German economy is showing signs of contraction.

The US bond market, which has been among the loudest and earliest to cry out warnings about weaker economic growth and inflation, also continued to show concern as yields fell.

Argentina’s peso, meanwhile, jumped on Thursday after a bruising sell-off in the past three sessions and most other Latin American currencies stabilised amid receding worries about a recession in the world’s largest economy.

The Brazilian real jumped as much as 1 per cent before easing slightly to trade at 4.0286 per dollar after the central bank announced its decision to sell dollars in the spot currency market for the first time in over a decade.

The dollar recovered from early weakness against the safe-haven yen on the better-than-expected US retail sales. The yen tends to benefit from geopolitical or financial stress as Japan is the world’s biggest creditor nation.

The Japanese yen weakened 0.22 per cent versus the greenback at 106.16 per dollar. The dollar index rose 0.15 per cent, with the euro down 0.26 per cent to $1.1109. —