Headlines like this cause skittishness! .... Aivars Lode
For much of this year, stocks have rallied on expectations that the U.S. Federal Reserve would cut interest rates, lifting the Dow to record highs in July. But after the Fed delivered its long-awaited rate cut last week, stocks tumbled as the trade dispute between Washington and Beijing worsened and the U.S. central bank appeared to signal it may hold back from further monetary easing. .
Stocks edged lower Friday, capping a tumultuous week where investors ricocheted between risky and safe assets as they reacted to the trade war and emerging currency fight between Washington and Beijing.
President Trump on Friday morning suggested a meeting with China on trade might be canceled, putting downward pressure on stocks. The Dow Jones Industrial Average fell 0.2% Friday afternoon. The S&P 500 dropped 0.6%, while the tech-heavy Nasdaq Composite was down 0.9%. After all the big swings of recent days, all three major indexes were set to close the week with modest drops less than 1%.
“We’re not ready to make a deal, but we’ll see what happens,” Mr. Trump told reporters Friday morning. “We will see whether or not China keeps our meeting in September.”
Markets around the world have swung this week after moves from China’s central bank triggered fears that the trade fight with the U.S. could spread to a new front in the foreign-exchange markets.
What began as a rout on Monday--with U.S. stocks suffering their worst one-day drop of the year--reversed course as Beijing didn’t take as aggressive a stance on weakening the yuan as some investors feared. The S&P 500 rebounded 1.9% on Thursday, before resuming its drop today.
For much of this year, stocks have rallied on expectations that the U.S. Federal Reserve would cut interest rates, lifting the Dow to record highs in July. But after the Fed delivered its long-awaited rate cut last week, stocks tumbled as the trade dispute between Washington and Beijing worsened and the U.S. central bank appeared to signal it may hold back from further monetary easing. .
The cocktail of trade tensions and rate-cut hopes has led to a stock market that has risen about 17% year-to-date, but it is also only up a little more than 2% from where it was a year ago.
At the heart of investors’ worries is that the trade war could push the U.S. and world economies into a slowdown. In a rapid-fire series of events this month, Mr. Trump ordered tariffs on $300 billion in Chinese imports to take effect Sept. 1, Beijing said it had halted U.S. agricultural imports and allowed the yuan to weaken, and the U.S. Treasury designated China a currency manipulator.
Adding to concerns about a global slowdown, the U.K. reported Friday that its gross domestic product unexpectedly contracted in the second quarter, as Brexit worries took their toll.
“There’s a lot more recession talk coming up,” said Jack Janasiewicz, a portfolio strategist at Natixis Investment Managers. “2008 remains fresh in a lot of investors minds, and people are pretty quick to de-risk.”
Investors have piled into safe-haven assets such as U.S. government bonds and gold amid the latest turmoil. The yield on the 10-year U.S. government bond hit its lowest level in several years earlier this week. It was recently 1.724%, up from 1.710% on Thursday, after choppy trading. Yields move in the opposite direction as prices. Gold futures were little changed at $1,509.80 a troy ounce on Friday, after settling at six-year highs on Wednesday.
Investors have piled into safe-haven assets such as U.S. government bonds and gold amid the latest turmoil. The yield on the 10-year U.S. government bond hit its lowest level in several years earlier this week. It was recently 1.724%, up from 1.710% on Thursday, after choppy trading. Yields move in the opposite direction as prices. Gold futures were little changed at $1,509.80 a troy ounce on Friday, after settling at six-year highs on Wednesday.
The yuan remained stable Friday, but the offshore rate to the dollar was weaker than a previous key level, with the currency trading at 7.08 to the dollar.
“The prospect that both governments were going to reach for measures that they hadn’t previously used was very disappointing for markets this week,” said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.
In the U.S., shares of Uber Technologies fell 6% after the ride-hailing company reported a bigger-than-expected quarterly loss after markets close on Thursday.
In Europe, the benchmark Stoxx 600 index dropped 0.8%, while the British pound touched multiyear lows against the euro and the dollar. Italian government bonds sold off heavily, pushing yields sharply higher after Matteo Salvini, the head of the far-right League party, sought to trigger elections.
China’s Shanghai Composite Index fell 0.7% after economic data on Friday showed that producer prices have fallen into deflation for the first time in three years, as worries over the trade war with the U.S. sapped demand.
U.S. crude oil gained 3.7% to $54.49 a barrel. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, slipped less than 0.1%.
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