Global stocks retreat on trade angst; Brexit battle hits pound

Oil falls on concerns over US-China talks, weak data

NEW YORK, Oct 8, (RTRS): Oil prices and stocks across major markets fell on Tuesday as tension rose between China and the United States ahead of high-level trade talks, while the British pound sank on reports that Brexit negotiations were close to breaking down.

Gold and the yen rose, indicating increased appetite for safe-haven assets.

Washington widened its trade blacklist to include some of China’s top artificial intelligence start-ups, punishing Beijing for its treatment of Muslim minorities and ratcheting up tensions ahead of trade talks in Washington this week.

The Dow Jones Industrial Average fell 275.45 points, or 1.04 percent, to 26,202.57, the S&P 500 lost 34.18 points, or 1.16 percent, to 2,904.61 and the Nasdaq Composite dropped 90.80 points, or 1.14 percent, to 7,865.50.

The pan-European STOXX 600 index lost 0.92 percent and MSCI’s gauge of stocks across the globe shed 0.91 percent.

Boosted by gains in Asia, emerging market stocks rose 0.01 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.22 percent higher, while Japan’s Nikkei rose 0.99 percent.

Chinese mainland stocks returned from a week-long holiday with a 0.3% rise, but a private survey showed growth in China’s services sector at its slowest in seven months in September. Despite expectations for lower rates, the US dollar rose against a basket of peers.

The dollar index rose 0.2 percent, with the euro down 0.21 percent to $1.0947.

Sterling tumbled after reports that Brexit talks between Britain and Brussels were close to breaking down.

The EU accused Britain of playing a “stupid blame game” after a Downing Street source said a deal was essentially impossible because German Chancellor Angela Merkel had made unacceptable demands.

Sterling last traded at $1.2205, down 0.69 percent on the day. The safe-haven yen strengthened 0.18 percent versus the greenback at 107.11 per dollar.

In emerging currency markets the focus remained on the Turkish lira, which edged higher after hitting a five-week low in early trade over concerns about a planned Turkish military incursion in northern Syria.

Trump threatened to destroy Turkey’s economy if Ankara took those moves too far, after the US leader opened that door by ordering the withdrawal of US troops from the area.

The Turkish lira was flat versus the US dollar at 5.83 after falling more than 2% on Monday.

Worries over the health of the global economy sent oil prices lower. US crude fell 0.95 percent to $52.25 per barrel and Brent was last at $57.88, down 0.81 percent on the day.

Spot gold added 0.6 percent to $1,502.62 an ounce. US gold futures gained 0.25 percent to $1,501.50 an ounce.

Copper lost 0.47% to $5,695.00 a tonne.

US

US stocks tumbled on Tuesday as optimism faded over the outcome of trade talks after a report the Trump administration was moving ahead with efforts to limit capital flows to China and the inclusion of Chinese firms to a blacklist.

The declines were broad-based, with the 11 major S&P 500 sectors trading lower and all the 30 components of the blue-chip Dow Jones index in negative territory.

The US widened its trade blacklist to include Chinese video surveillance firm Hikvision and surveillance equipment maker Zhejiang Dahua Technology among others, drawing a sharp rebuke from Beijing.

This pressured US suppliers. Intel Corp, Nvidia Corp, Western Digital and Seagate Technology fell between 1.7% and 4%, while Ambarella Inc slumped 9%.

The Philadelphia Semiconductor index declined 2.6%, while technology stocks dropped 1.2%.

Weighing on the Dow Jones Industrial Average was a 1.6% fall in shares of Boeing Co.

The Wall Street Journal reported friction between the United States and Europe could further delay efforts to resume flights of the planemaker’s bestselling 737 MAX jets, which have been grounded since early 2019. Boeing said it delivered half the number of planes in the first nine months of 2019 than it did in the same period a year earlier.

At 11:27 am. ET, the Dow Jones Industrial Average was down 283.29 points, or 1.07%, at 26,194.73, while the S&P 500 was down 35.46 points, or 1.21%, at 2,903.33. The Nasdaq Composite was down 94.03 points, or 1.18%, at 7,862.27. The S&P 500 and Dow indexes fell below their 100-day moving average.

Despite the steep declines, the indexes were trading above last week’s lows, when a contraction in US manufacturing and a dismal reading on business activity sparked fears of a looming recession in the world’s biggest economy.

While moderate jobs growth in September lifted sentiment on Friday, traders still see an 84% chance of the Federal Reserve cutting interest rates by a quarter percentage point in October, according to CME Group’s FedWatch tool.

Those bets were bolstered on Tuesday by data that showed US producer prices unexpectedly fell in September.

Market participants will now focus on third-quarter earnings season beginning next week and analysts expect the worst quarterly profit performance since 2016, with earnings from S&P 500 companies declining nearly 3% from a year earlier, based on IBES data from Refinitiv.

US-listed Chinese stocks declined, with Alibaba Group Holding, JD.com Inc and Baidu Inc falling between 1.5% and 3%.

Declining issues outnumbered advancers for a 3.59-to-1 ratio on the NYSE and for a 3.63-to-1 ratio on the Nasdaq. The S&P index recorded two new 52-week highs and 15 new lows, while the Nasdaq recorded eight new highs and 101 new lows.

UK

UK-focused stocks from Tesco to housebuilders sank on Tuesday as worries over a no-deal Brexit peaked after a Downing Street source said a divorce deal was essentially impossible, while LSE dropped after the Hong Kong bourse dropped its takeover bid.

The FTSE 250 index, whose constituents make half their earnings from the UK, stumbled to its lowest in more than a month and ended 1.1% lower.

The blue-chip index, also vulnerable to hits from a deterioration in the global trade scenario, dropped 0.8% ahead of the much-anticipated resumption of USChina negotiations this week.

At home, Brexit took centre stage again amid fears that any potential agreement between Britain and the European Union was dead in the water as both parties positioned themselves to avoid blame for another extension or a chaotic no-deal Brexit.

Those fears translated into a sell-off in shares of companies perceived to be most exposed to a fallout from Brexit.

Europe

European shares fell on Tuesday as an escalation in US-China trade tensions and Brexit worries along with disappointing corporate news dented sentiment.

The pan-European STOXX 600 index ended down 1.1%. Qiagen’s 21% tumble led losses after the biotech company said its chief executive would step down and warned on third-quarter preliminary sales.

All major sectors in Europe were in the red, and while most of the big markets in the region slid more than 1%, losses in London’s FTSE 100 were limited to 0.8% as its exporters benefited from a battered pound.

Germany’s export-reliant DAX fell 1.1%, with an unexpected rise in August industrial output providing little relief from fears of the economy slipping into recession.

Among stocks, some weak forecast and takeover concerns weighed on the biggest decliners. Shares of London Stock Exchange Group dropped 5.8% after Hong Kong’s bourse withdrew its $39 billion bid.

Energy firm Uniper slumped 8.5% as Finnish utility Fortum got closer to full ownership of the German firm, a move Uniper’s top management had warned could threaten the firm’s credit rating.

Profit-taking got the best of British airline easyJet with some brokers also disappointed by a lack of positivity in the company’s outlook. The carrier’s 7.5% slide dragged Europe’s travel and leisure sector down 1.8%, the biggest decline among major sectors.

At the other end, shares of Airbus rose 0.4% after the planemaker reported higher orders for the first nine months of the year, putting it well ahead of US rival Boeing. Boeing’s sales have been hampered by the grounding of its fast-selling jet, the 737 MAX, in the wake of two accidents in Indonesia and Ethiopia.

Asia

Asian shares rose Tuesday despite continuing worries about the health of the global economy ahead of trade talks between the US and China.

Japan’s benchmark Nikkei 225 gained 1.0% to 21,587.78 and Australia’s S&P/ ASX 200 added 0.5% to 6,593.40. South Korea’s Kospi gained 1.2% to 2,045.90. Hong Kong’s Hang Seng climbed 0.7% to 25,992.12.

Chinese markets resumed trading after a week-long holiday, with the Shanghai Composite climbing 0.5% at 2,918.74. Shares also rose in Taiwan and Southeast Asia.

Oil

Oil prices fell on Tuesday as Washington’s blacklisting of more Chinese companies dampened hopes for a trade deal between the two countries, though unrest in Iraq and Ecuador lent some support to crude prices.

Both Brent crude and West Texas Intermediate (WTI) crude had risen by more than 1% earlier in the day, but by 1327 GMT Brent was down 64 cents, or 1.1%, at $57.71 a barrel and WTI was down 67 cents, or 1.3%, at $52.08.

Oil prices were also pressured by weak economic data after U.S. producer prices fell unexpectedly in September, weighed down by lower costs of goods and services, which could give the Federal Reserve room to cut interest rates again this month.

Crude inventories in the United States are expected to have grown for a fourth week while distillates and gasoline stocks are also likely to have fallen, a Reuters poll showed on Monday.

However, protests in OPEC members Iraq and Ecuador threatened to disrupt their oil output and supported prices.

Currencies

The dollar slipped against the safehaven Japanese yen on Tuesday amid renewed trade-related worries and as an unexpected drop in US producer inflation supported the case for the Federal Reserve room to cut interest rates again later this month.

Against the yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar fell 0.32% to 106.94 yen.

Investors, who have boosted the dollar in recent months thanks to its relatively high interest rate and a strong US economy, were reluctant to push it significantly higher on Tuesday.