Wall Street dips, dollar rises on weak factory data, trade jitters

Oil drops more than 2% as trade war rumbles, output swells

NEW YORK, Sept 3, (RTRS): Wall Street lost ground and the US dollar strengthened to its highest level in more than two years on Tuesday as trade worries persisted and US factory activity entered contraction territory for the first time since February 2016.

As new tariffs on Chinese goods went into effect over the US Labor Day weekend, market participants are apparently losing faith that the world’s two largest economies will reach a near-term resolution to their long-running trade war, which has rattled markets for months and weighed on world economies.

The Dow Jones Industrial Average fell 340.49 points, or 1.29%, to 26,062.79, the S&P 500 lost 22.79 points, or 0.78%, to 2,903.67 and the Nasdaq Composite dropped 67.90 points, or 0.85%, to 7,894.99.

European shares fell for the first time in four sessions on Tuesday, as uncertainty over a looming no-deal Brexit and lingering US-China trade tensions dampened investor optimism.

The pan-European STOXX 600 index lost 0.38% and MSCI’s gauge of stocks across the globe shed 0.56%. Trade concerns also dampened emerging markets.

Emerging market stocks lost 0.89%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.75% lower, while Japan’s Nikkei rose 0.02%.

Trade and Brexit concerns drove the dollar, against a basket of major world currencies, to its highest level since midMay 2017, and sent the Euro plunging to a 28-month low versus the greenback.

The dollar index rose 0.07%, with the euro up 0.05% to $1.0972.

The Japanese yen strengthened 0.32% versus the greenback at 105.89 per dollar, while Sterling was last trading at $1.2068, up 0.02% on the day.

US Treasury yields fell, with the benchmark 10-year yield at its lowest since July 2016 following the downbeat ISM report and worries about a weakening global economy in the face of the USChina trade war.

Benchmark 10-year notes last rose 17/32 in price to yield 1.4489%, down from 1.506% late on Friday.

The 30-year bond last rose 34/32 in price to yield 1.9281%, down from 1.973% late on Friday.

Rising OPEC and Russian production, combined with demand concerns due to a global economic slowdown dragged down oil prices. US crude fell 3.39% to $53.23 per barrel and Brent was last at $57.60, down 1.81% on the day.

Gold prices held steady, with the safehaven precious metal hovering just below its more than six-year high of $1,554.56.

Spot gold added 0.9% to $1,543.47 an ounce.

Copper lost 0.78% to $5,576.00 a tonne. Three-month aluminum on the London Metal Exchange lost 0.26% to $1,744.50 a tonne.

US

US stocks fell on Tuesday as data showed factory activity contracted for the first time since 2016 in August, renewing fears that a drawn-out trade war between the United States and China could tip the world’s largest economy into recession.

The Institute for Supply Management said its index of national factory activity decreased to 49.1, compared with a reading of 51.1 estimated by analysts polled by Reuters.

The weak data also weighed on US Treasury yields, with the benchmark 10year yield falling to its lowest since July 2016. Shares of banks, which typically come under pressure in a low interest rate environment, slid 2.1%.

US stocks opened lower as the lack of progress on negotiations between Washington and Beijing amid a new round of tariffs kicking in over the weekend weighed on sentiment.

The United States on Sunday began imposing 15% tariffs on a variety of Chinese goods, and China began imposing new duties on US crude oil.

The energy sector tumbled 1.7%, as rising OPEC and Russian crude output also drove a slump in oil prices.

Trade-sensitive industrials slipped 1.7%, while technology stocks fell 1.2%.

Chipmakers, which draw a large portion of their revenue from China, also fell, with the Philadelphia Semiconductor index down 1.9%.

The S&P 500 index fell 1.8% in August, its biggest monthly drop since May, after escalating trade tensions and the inversion of a key part of the US yield curve, seen as a sign of recession, drove investors toward safe-haven assets.

At 11:23 am. ET the Dow Jones Industrial Average was down 361.35 points, or 1.37%, at 26,041.93 and the S&P 500 was down 24.80 points, or 0.85%, at 2,901.66.

The Nasdaq Composite was down 78.11 points, or 0.98%, at 7,884.78.

Weighing the most on the Dow were shares of Boeing Co , which tumbled 3.4% after the Federal Aviation Administration said on Friday a global panel of experts will need a few more weeks to finish its review into the company’s 737 MAX certification.

US casino operators felt the brunt of slowing economic growth in China as gambling hub Macau posted weak August casino revenue. Shares of Wynn Resorts Ltd, Las Vegas Sands Corp and MGM Resorts International fell between 2.4% and 4.5%.

Among few gainers were the defensive utilities, real estate and consumer staples sectors.

Declining issues outnumbered advancers for a 2.10-to-1 ratio on the NYSE and for a 2.80-to-1 ratio on the Nasdaq.

The S&P index recorded 33 new 52week highs and eight new lows, while the Nasdaq recorded 35 new highs and 103 new lows.

UK

London-listed stocks most exposed to the British economy fell as investors worried the country was heading for a chaotic no-deal exit from the European Union or an early national election, while global growth concerns also persisted.

It is relatively rare for the exportheavy FTSE 100 to move in lockstep with sterling, but losses in companies more exposed to the domestic economy, such as banks and house builders, offset gains in big internationally focused firms.

The index was down 0.2% after climbing initially on sterling’s fall to a three-year low, underscoring deepening concerns about the fall-out across the economy from a no-deal Brexit and the possibility of another election. The pound later clawed back some of those losses.

The midcap index, traditionally harder hit by Brexit concerns, was down 0.1%.

Stocks considered most exposed to any hit to Britain’s wealth resulting from Brexit were the biggest fallers with Lloyds and Royal Bank of Scotland dropped more than 1% each.

RBS and utilities also face the threat of nationalisation if a Labour government was to take charge.

Losses in home builders, which are vulnerable to a crash in house prices from an economic shock, were led by a 1.6% drop in the sector’s biggest player Barratt.

Retailers Morrison and Marks & Spencer were also down roughly 1.5%. M&S also faces relegation from the FTSE 100.

Among single stock moves, DS Smith slid 3.5% on the FTSE 100 as investors took note of the packaging company’s comments that volatility in the macroeconomic environment continued even as it reaffirmed annual targets.

Just Eat shares slipped nearly 3% as a top-10 shareholder is set to vote against the food delivery company’s proposed 9 billion pound merger with Takeaway.com, saying the deal undervalued Just Eat.

Plumbing products company Ferguson, meanwhile, outperformed the index with a 2.1% rise after saying it would separate its UK operations.

Among midcaps, Restaurant Group tumbled 13% on its worst day since November and sat at the bottom of midcap index after posting a loss versus a yearago profit, while small-cap inkjet technology firm XAAR plunged 30.7% to a 10-year low after warning on annual results.

Europe

European shares retreated from a 1-month high on Tuesday as weak US factory data added to worries about global growth, while uncertainty over Britain’s chaotic exit from the European Union knocked the FTSE 100 lower after a four-day run of gains.

The pan-European STOXX 600 index dropped 0.2% at the close after falling as much as 0.7% following the release of data showing US manufacturing activity contracted for the first time in three years in August.

The Institute for Supply Management’s latest numbers came as stark evidence of the US-China trade war taking a toll on global growth, sending risky assets such as oil and global stocks lower.

The rising worries encouraged investors to shift away from risky equities to safe-haven assets such as government bonds, resulting in yields on German and Italian 10-year bonds hitting a record low. Trade-sensitive shares of Germany and France were down about 0.4% each, while Milan-listed shares closed down 0.3%.

Defensive sectors such as utilities and telecoms were among the few sectors gaining in the STOXX 600, while oil and gas companies led decliners with a 0.9% loss as oil prices sank.

Shares of Takeaway.com dropped 5.9% after a top shareholder in Just Eat said it would vote against the British food delivery company’s proposed 9 billion pound ($11 billion) merger with Takeaway.com. Shares of Just Eat slid 2.8%, dragging the retail index down 0.4%.

France’s second largest telecoms operator Iliad fell 6.3%, the biggest decliner on the STOXX 600, after it reported a loss of 127,000 mobile subscribers to competitors in the first half of the year.

Asia

Asian stock markets were mostly lower Tuesday after investor jitters over US-Chinese trade tension were revived by a report negotiators cannot agree on a schedule for talks this month.

Tokyo’s market benchmark advanced while Shanghai, Hong Kong and South Korea declined.

The Shanghai Composite Index was off 1 point at 2,922.54 and Tokyo’s Nikkei 225 advanced 0.2% to 20,656.93. Hong Kong’s Hang Seng lost 0.1% to 25,601.70.

Seoul’s Kospi shed 0.2% to 1,964.24 and Sydney’s S&P-ASX 200 was 3 points lower at 6,576.20. India’s Sensex fell 1% to 36,916.76.

New Zealand and Singapore advanced while Taiwan and Indonesia retreated.

Oil

Oil prices fell more than 2% on Tuesday, weighed down by rising OPEC and Russian oil output as well as the protracted US-China trade dispute that has dragged on the global economy.

US crude was down $1.80, or 3.27%, at $53.30 a barrel by 1305 GMT and Brent crude was down $1.28 or 2.18% at $57.38.

Output from the Organization of the Petroleum Exporting Countries rose in August for the first month this year as higher supply from Iraq and Nigeria outweighed restraint by Saudi Arabia and losses caused by US sanctions on Iran.

Russian oil production in August rose to 11.294 million barrels per day (bpd), topping the rate cap pledged by Moscow in a pact with other producers and hitting its highest since March, data showed on Monday.

Data due this week on US inventory levels will be delayed by a day to Wednesday and Thursday because of the US Labor Day holiday on Monday.

Currencies

The dollar climbed on Tuesday to its strongest level in over two years against a basket of currencies as traders favored the greenback on worries about US-China trade tensions and a chaotic British exit from the European Union.

The dollar’s initial gains abated in the wake of a private report that showed the US manufacturing sector recorded its first monthly contraction since 2016 in August.

At 11:44 am. (1544 GMT), an index that tracks the dollar versus six major currencies was up 0.11% at 99.022. It hit 99.37 earlier Tuesday, which was its highest since May 2017.