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Trump orders extra tariffs on Chinese goods; China hits back
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Stocks slide, havens including Treasuries and gold advance
Investors dumped riskier assets and headed toward havens on Tuesday as a trade dispute between the world’s two largest economies showed signs of deepening and accelerating. Stocks dropped, Treasuries rallied and gold climbed with the yen.
Tough trade talk is nothing new for investors in 2018, but a sense that stress is ratcheting up between the U.S. and China is taking hold of markets. The protectionist moves come at a time when many are already voicing concern that global growth could lose momentum, as it also contends with America’s faster tightening of monetary policy and the end of European stimulus.
“What you saw at the start of the year was global synchronized growth,” Emad Mostaque, co-chief investment officer at Capricorn Fund Managers, said in an interview on Bloomberg Television. “It was a cooperative game. Now, we’re moving to a more competitive, negative sum game.”
Emerging markets were in turmoil as the implications of a possible trade war filter through to investors. Developing-nation stocks plunged and currencies dropped, with the South African rand leading declines.
Meanwhile, oil fell with other commodities, paring Monday’s gain as traders weigh OPEC’s discussions on a compromise over increasing output ahead of a meeting in Vienna this week.
Terminal users can read more in Bloomberg’s Markets Live blog.
Here are some key events to watch for this week:
- U.S. housing starts probably rose in May, data out Tuesday is expected to show.
- Draghi, Reserve Bank of Australia Governor Philip Lowe, Bank of Japan Governor Haruhiko Kuroda, and Fed Chairman Jerome Powell join a panel on central bank policy in Sintra, Portugal, on Wednesday.
- Thailand, Philippines and Brazil central bank decisions due Wednesday.
- Bank of England rate decision on Thursday.
- Also on Thursday: U.S. jobless claims, New Zealand GDP, South Korea export data.
- The Organization of Petroleum Exporting Countries meets in Vienna on Friday.
And here are the main market moves:
Stocks
- The Stoxx Europe 600 Index dipped 1.1 percent as of 9:15 a.m. London time, to the lowest in almost eight weeks on the largest decrease in three weeks.
- Futures on the S&P 500 Index sank 1.3 percent to the lowest in more than two weeks on the biggest tumble in eight weeks.
- The U.K.’s FTSE 100 Index dipped 0.7 percent to the lowest in six weeks.
- Germany’s DAX Index sank 1.7 percent to the lowest in almost three weeks on the biggest tumble in more than 12 weeks.
- The MSCI Emerging Market Index sank 1.8 percent, hitting the lowest in more than eight months with its fifth straight decline and the largest tumble in almost 12 weeks.
- The MSCI Asia Pacific Index sank 1.5 percent, reaching the lowest in more than six months on its fifth consecutive decline and the biggest tumble in almost 12 weeks.
Currencies
- The Bloomberg Dollar Spot Index increased 0.1 percent to the highest in more than 11 months.
- The euro fell 0.3 percent to $1.1585.
- The British pound declined 0.3 percent to $1.3206, the weakest in seven months.
- The Japanese yen jumped 0.7 percent to 109.74 per dollar, the strongest in more than a week on the biggest increase in almost four weeks.
- The Turkish lira decreased 0.7 percent to 4.7393 per dollar, the weakest on record.
Bonds
- The yield on 10-year Treasuries fell five basis points to 2.87 percent, the lowest in almost three weeks on the biggest drop in more than a week.
- Germany’s 10-year yield declined three basis points to 0.37 percent, hitting the lowest in almost three weeks with its sixth straight decline.
- Britain’s 10-year yield dipped four basis points to 1.324 percent, reaching the lowest in more than two weeks on its sixth straight decline and the biggest decrease in three weeks.
- Italy’s 10-year yield advanced three basis points to 2.582 percent, the first advance in a week and the largest gain in more than a week.
Commodities
- West Texas Intermediate crude fell 0.8 percent to $65.31 a barrel.
- Gold increased 0.2 percent to $1,281.14 an ounce.
- Brent crude declined 0.7 percent to $74.80 a barrel.
By Samuel Potter – June 19, 2018, 6:27 PM GMT+10
— With assistance by Robert Fullem, Ruth Carson, Andreea Papuc, and Adam Haigh
Source: Bloomberg