Stocks pare losses, but trade dispute between world’s two biggest economies still weighs
U.S. stocks pared losses, while haven demand eased as investors speculated that the final form of any Chinese tariffs might be less onerous than currently proposed.
The S&P 500 Index cut its decline by almost two-thirds as representatives from China and the Trump administration left the door open for a negotiated solution. The proposals wouldn’t take effect for months.
Still, fear that the tensions will escalate further hit specific sectors after China said it would levy 25 per cent tariffs on some U.S. imports. Boeing lost more than 3 per cent and semiconductor shares fell nearly 2 per cent. The Cboe Volatility Index jumped to 22, nearly double its level for the past year. Soybeans slumped almost 3 per cent, while energy producers retreated.
“Markets don’t like uncertainty, and this back and forth with what the U.S. is doing with tariffs and targeting specifically Chinese products and Chinese trade relationships and policies, they’re obviously not good,” Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management, said in an interview at Bloomberg’s New York headquarters.
Markets have been buffeted in recent weeks by everything from a volatility spike and a tech selloff to fears of an all-out trade war, and developments on Wednesday suggest there may be more turbulence to come. Investors are having to weigh the growing protectionist rhetoric between the U.S. and China against the chances of measures having a meaningful effect on the still-upbeat global growth picture.
“Trade uncertainty is the main headwind to the market,” Charles St-Arnaud, an investment strategist at Lombard Odier Asset Management in London, said by phone. “At this juncture we need to be careful. The macro picture hasn’t changed massively yet. Growth remains robust, unless we go into a bigger trade war.”
Elsewhere inflation data from Europe matched estimates, and the euro stayed higher. West Texas oil fell as commodities were roiled by the growing trade dispute, while emerging-market stocks tumbled and their currencies dropped.
“This is a tricky one for markets,” said Thomas Thygesen, SEB AB’s head of cross-asset strategy in Copenhagen. “This inherent unpredictability will weigh on global economic growth. Sentiment is quite negative and the one thing that could change this is some sort of signal from central banks that they are willing to adapt their hawkish tone.”
These are the main moves in markets:
Stocks
The S&P 500 fell 0.6 per cent as of 10:55 a.m. in New York. The Nasdaq 100 Index lost 1.2 per cent. Boeing’s 3.3 per cent drop was the biggest in the Dow Jones Industrial Average. The Stoxx Europe 600 Index dropped 0.7 per cent. The MSCI Emerging Market Index fell 1.6 per cent to the lowest in almost eight weeks. The MSCI Asia Pacific Index fell 0.7 per cent to the lowest in almost eight weeks.
Currencies
The Bloomberg Dollar Spot Index dipped 0.1 per cent. The euro advanced 0.2 per cent to US$1.2289. The British pound declined 0.1 per cent to US$1.4046. The Japanese yen climbed 0.4 per cent to 106.23 per dollar.
Bonds
The yield on 10-year Treasuries fell one basis point to 2.77 per cent. Germany’s 10-year yield dipped one basis point to 0.49 per cent, the lowest in 12 weeks. Britain’s 10-year yield declined two basis points to 1.359 per cent, the lowest in almost 11 weeks.
Commodities
West Texas Intermediate crude fell 1.5 per cent to US$62.57 a barrel, the lowest in more than two weeks. Copper sank 2.5 per cent to US$2.99 a pound and the biggest tumble in eight weeks. Gold increased 1 per cent to US$1,346.43 an ounce, the highest in more than a week. The Bloomberg Commodity Index decreased 1.1 per cent to 86.05, the lowest in almost eight weeks on the biggest tumble in almost eight weeks.