Boeing shares an early casualty in potential trade war

The steep erosion in Boeing shares this week are reflecting a broader angst as investors turn their attention to President Donald Trump’s trade policy.

Investors are bracing for potential retaliation from countries like China as Trump considers levying tariffs on its exports to the U.S., and many are concerned Boeing could be at the forefront of this trade war. The link between Boeing and the market has strengthened over the past month, according to data compiled by Bloomberg.

At 0.7, the measure of its correlation to the S&P 500 over 22 days has strengthened steadily since August, when the data showed a negative correlation.

Part of the weakness in Boeing “is obviously associated with some of the trade headlines,” Jeff Windau, an analyst at Edward Jones told Bloomberg TV in an interview. “It is a very large exporter.”

Trade, however, is not the only concern weighing on Boeing’s share price, which are headed toward their biggest weekly slump in more than two years, having fallen almost 7 percent, compared with a 1.2 percent decline in the S&P 500 Index. Investors in the aerospace and defense giant are also concerned about growing signs of stress to aerospace partsmakers as Boeing and Airbus ramp up production of their cash-cow single-aisle jets to record levels and plot further output increases for the early 2020s.

Spirit AeroSystems Holdings, which builds 70 percent of Boeing’s 737 jet, warned Wednesday that some of its suppliers were struggling to keep pace.

Lufthansa on Thursday said engine delays extended to a General Electric-Safran joint venture that also builds turbines for Boeing’s 737 Max.

“We believe suppliers as a group are paddling very hard below the water, but ultimately we expect most issues to be temporary and we assume suppliers will incur extra cost before causing delays at Boeing,” JPMorgan analyst Seth Seifman wrote in a note. “A trade war is a genuine risk but there are good reasons for China to stay its hand against Boeing.”