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U.S. equity futures slump as protectionist moves intensify
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Treasuries, European bonds edge higher; yen gains with gold
Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, sending U.S. stock futures tumbling and sinking European and Asian equities. Treasuries nudged higher, the dollar slipped and gold jumped.
Hopes that Tuesday’s gains in U.S. equity markets would lead to a more lasting rebound appeared to founder as contracts for the S&P 500, Nasdaq 100 and Dow all slumped alongside both the Stoxx Europe 600 Index and the MSCI Asia Pacific Index. China said it would levy 25 percent tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties on its high-tech goods. Safe-haven assets including gold and the Japanese yen rallied, while European bonds gradually turned higher.
Terminal users can follow the escalating trade tensions in our live blog.
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.
“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.”
Elsewhere, West Texas oil fell as commodities were roiled by the growing trade dispute. Inflation data from Europe matched estimates, and the euro stayed higher. Emerging-market stocks tumbled and their currencies dropped.
Here are some key events coming up this week:
- U.S. employment data are due Friday; the jobless rate probably fell in March after holding at 4.1 percent for five straight months.
- The Reserve Bank of India decides on policy Thursday.
These are the main moves in markets:
Stocks
- The Stoxx Europe 600 Index dipped 0.7 percent as of 10:09 a.m. London time on the largest decrease in more than a week.
- Futures on the S&P 500 Index declined 1.4 percent.
- The MSCI All-Country World Index dipped 0.3 percent.
- The U.K.’s FTSE 100 Index dipped 0.4 percent to the lowest in more than a week.
- Germany’s DAX Index sank 1.1 percent on the largest tumble in more than a week.
- The MSCI Emerging Market Index fell 1.5 percent to the lowest in almost eight weeks.
- The MSCI Asia Pacific Index fell 0.6 percent to the lowest in almost eight weeks.
Currencies
- The Bloomberg Dollar Spot Index dipped 0.1 percent.
- The euro advanced 0.2 percent to $1.2292.
- The British pound gained 0.1 percent to $1.4074, the strongest in a week.
- The Japanese yen jumped 0.4 percent to 106.18 per dollar, the largest climb in more than a week.
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.77 percent.
- Germany’s 10-year yield dipped one basis point to 0.50 percent, the lowest in 12 weeks.
- Britain’s 10-year yield fell one basis point to 1.359 percent, the lowest in almost 11 weeks.
Commodities
- West Texas Intermediate crude decreased 1.8 percent to $62.37 a barrel, the lowest in more than two weeks.
- Copper decreased 1.5 percent to $3.02 a pound and the biggest tumble in almost four weeks.
- Gold increased 0.8 percent to $1,343.89 an ounce, the highest in more than a week.
- The Bloomberg Commodity Index decreased 1.3 percent to 85.88, the lowest in almost eight weeks on the biggest tumble in almost eight weeks.
By Samuel Potter and Sofia Horta E Costa
— With assistance by Andreea Papuc
Source: Bloomberg