Global equities, yields down as trade frictions unnerve traders

S&P 500, Nasdaq see worst weekly percentage plunges since Dec

NEW YORK, Aug 3, (RTRS): A measure of stocks across the globe posted on Friday its largest weekly loss of the year while yields in US and German debt were near or at multi-year lows, after China vowed to retaliate against a possible new round of US tariffs.

Analysts have said retaliatory options include tariffs, a ban on export of rare earths used in everything from military equipment to consumer electronics, and penalties against US companies in China.

The Dow Jones Industrial Average fell 98.41 points, or 0.37%, to 26,485.01, the S&P 500 lost 21.51 points, or 0.73%, to 2,932.05 and the Nasdaq Composite dropped 107.05 points, or 1.32%, to 8,004.07.

The Wilshire 5000 total US stock market index lost $1.1 trillion in market capitalization over the week.

The pan-European STOXX 600 index lost 2.46%, the most for any day this year, and MSCI’s gauge of stocks across the globe shed 1.18%.

Emerging market stocks lost 2.03% and posted their ninth-straight session of declines, while futures in Japan’s Nikkei lost 0.71%.

US data on Friday showed employment growth in July slowed as expected, which along with trade turmoil may encourage the Federal Reserve to cut interest rates again in September.

US

Wall Street extended its sell-off on Friday on renewed trade fears as the benchmark S&P 500 index and Nasdaq saw their worst weekly percentage plunges since December, when investors were spooked by the prospect of a looming recession.

The blue chip Dow and the S&P 500 hit their lowest levels since late June with S&P 500 and the Nasdaq registering their fifth consecutive days of losses.

The Dow Jones Industrial Average fell 98.41 points, or 0.37%, to 26,485.01, the S&P 500 lost 21.51 points, or 0.73%, to 2,932.05 and the Nasdaq Composite dropped 107.05 points, or 1.32%, to 8,004.07.

Of the 11 major sectors in the S&P 500, eight closed in the red.

Technology companies, which get a sizeable portion of their revenue from China, were the hardest hit, falling 1.7%. This sector was weighed by iPhone maker Apple Inc and chipmakers. The Philadelphia Semiconductor index slipped 1.6%, while shares of Apple fell 2.1%.

Second-quarter earnings season passed its halfway mark, with 380 of the companies in the S&P 500 having reported. Of those, 73.9% have beaten analyst expectations.

New tariff threats dragged oil prices lower for the week, as Exxon Mobil and Chevron reported quarterly results.

Exxon topped analyst expectations but fell year-on-year, while Chevron’s earnings rose 26%, in line with forecasts.

Sprint Corp shares dropped 5.8% even after reporting fewer-than-expected phone subscriber losses in the quarter.

Restaurant Brands International jumped 6.1%, after quarterly profits topped expectations.

UK

UK shares plunged to their lowest in a over a month on Friday after US President Donald Trump threatened to hit China with more trade tariffs, while a Brexit-induced warning on targets knocked shares in Royal Bank of Scotland.

The FTSE 100 index slumped 2.3% on its worst day fo far this year, while the FTSE 250 midcap index weakened by 1.7%.

All of the major constituent sectors on both indexes ended with losses for the day.

Asia-focussed bank stocks, including HSBC, and oil majors Shell and BP led losses on the main index after Trump vowed to impose a 10% tariff on $300 billion worth of Chinese imports from Sept 1.

Industrials Melrose and Ashtead, typically more exposed to global trade conditions, both lost about 5%.

RBS plummeted 6.5% to a sevenmonth low as it warned that deteriorating economic conditions before Brexit were likely to derail next year’s profitability and cost targets.

British Airways owner IAG, however,

jumped 8.4% - its biggest one-day gain in eight years - after reporting strong profit numbers for the first half of its key summer period.

Europe

European stock indexes dived by as much as 2% on Friday as US President Donald Trump’s warning of new tariffs on China sank stock markets worldwide and sent trade-sensitive sectors like mining and carmakers into a tailspin.

Abruptly ending a temporary trade truce between the two countries, Trump said he would impose a 10% tariffs on $300 billion of Chinese exports to the United States from September 1.

Spooking investors further, Bloomberg reported that Trump is scheduled to make a statement on trade with the European Union at 1745 GMT on Friday.

That sent the pan-European STOXX 600 down 1.9% to a six-week low, with the basic material sector plunging 3.9%, and the auto and tech sectors sliding 2.7%.

Chipmakers Siltronic, Infineon, STMicro and ASML dropped by 4% to 6% while France’s CAC 40 and Germany’s DAX, often regarded as among the most sensitive markets to trade nerves, lost around 2.3%.

Most of Europe’s main markets were set for their worst week since a slide in May, when a sudden break-down in trade talks between the two countries hammered markets.

Adding to the auto sector’s woes, Italian tyremaker Pirelli slipped 4.6% after cutting revenue guidance for the second time this year, joining a string of suppliers hit by a broader auto industry downturn.

Corporate earnings for the second three months of the year continue to pour in. French lender Credit Agricole slipped 5.3% after it said that a weak performance at its corporate and investment unit had weighed on its profits.

Asia

The Shanghai Composite Index lost 1.4% to 2,867.84 while Tokyo’s Nikkei 225 declined to 21,087.16.

Hong Kong’s Hang Seng fell to 26,918.58 while Seoul’s Kospi shed 1% to 1998.13. Sydney’s S&P-ASX 200 retreated 0.3% to 6,768.60. Taiwan declined while Southeast Asian markets were mixed.

India’s Sensex edged up 0.5% at 37,196.21 and New Zealand was higher.

Also Friday, China’s yuan fell to its lowest level this year against the dollar after Trump’s tariff threat fueled economic growth jitters. The yuan came close to breaking the politically sensitive level of seven to the dollar.

The yuan tumbled to 6.9520 to the dollar, its weakest since December, but recovered slightly by midday.

Trump also expressed frustration the Fed isn’t cutting interest rates more aggressively.