Trader Steven Kaplan works on the floor of the New York Stock Exchange, Tuesday, June 19, 2018.Richard Drew/The Associated Press
Global stock markets tumbled and U.S. bond yields fell on Tuesday while the dollar rose as investors flocked to safety in the face of a rapidly escalating U.S.-China trade conflict.
Agricultural commodities were also hammered with soybeans feeling the most pain after U.S. President Donald Trump threatened to impose a 10-per-cent tariff on another $200 -billion of Chinese goods. China’s commerce ministry described the threat as “blackmailing” said Beijing would fight back with “qualitative” and “quantitative” measures..
Government bonds and the Japanese yen rallied as investors sought protection. Oil futures also pulled back with U.S. crude seeing the deepest declines.
Wall Street’s three major indexes were lower, though the S&P 500’s decline was much more measured than that of overseas markets. In China, the Shanghai Composite Index had slumped nearly 5 per cent at one point.
“The administration has said the saber rattling on trade is a negotiating tactic and that Trump isn’t going to create a trade war. That’s the bullish case but as the new developments keep unfolding it looks more and more like a trade war,” Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
The Dow Jones Industrial Average fell 341.83 points, or 1.37 per cent, to 24,645.64, the S&P 500 lost 20.98 points, or 0.76 per cent, to 2,752.77 and the Nasdaq Composite dropped 76.32 points, or 0.99 per cent, to 7,670.71.
In Toronto, the S&P/TSX composite index sat 0.3 per cent lower, or 48.74 points, at 16,335.06 at 11:24 a.m. ET.
The pan-European FTSEurofirst 300 index lost 0.6 per cent and MSCI’s gauge of stocks across the globe shed 1 pe cent.
Front month soybean contracts fell 5.5 per cent, or 50 cents a bushel, to $8.58 a bushel, and at one point fell to $8.41 a bushel, lowest for that crop since December 2008. U.S. crude oil fell 1.2 percent, or 80 cents a barrel, to $65.04; China has threatened to impose tariffs on U.S. crude exports.
GREAT FALL OF CHINA
Emerging market stocks lost 2 per cent while MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.3 percent lower.
The Shanghai Composite Index ended 3.8 percent lower after slumping nearly 5 percent at one point to its lowest level since mid-2016. Hong Kong’s Hang Seng closed 2.8 percent lower. Japan’s Nikkei lost 1.8 percent.
China’s economy is already clouded by a sharp slowdown in fixed asset investment growth because of the government’s de-leveraging drive, a problematic property sector, mounting debt and rising credit defaults.
“The rising risk of a disruptive trade conflict makes a bad situation tentatively worse,” economists at Nomura wrote.
The dollar, yen and Swiss franc rose on Tuesday as traders piled into perceived less risky currencies due to the U.S.-China trade dispute.
The dollar index rose 0.31 per cent, with the euro down 0.47 per cent to $1.1567.
The Swiss franc increased 0.6 per cent against the euro at 1.1495 francand was marginally higher versus the greenback at 0.9948 franc.
The Japanese yen strengthened 0.70 per cent versus the greenback at 109.80 per dollar as the yen is often sought as a safe haven in times of market turmoil and political tensions.
The skid by China’s yuan to a five-month low was its biggest fall in a year and a half.
U.S. 10-year and 30-year yields fell to three-week lows, while those on two-year notes slid to two-week troughs.
U.S. benchmark 10-year yields fell to a three-week low of 2.853 percent US10YT=RR, from Monday’s 2.926 per cent. They were last at 2.878 percent.
U.S. 30-year yields dropped to 2.991 per cent, a three-week low as well, compared with 3.055 per cent on Monday, and were last at 3.014 percent.
With Russia and Saudi Arabia pushing for higher output, crude oil markets were volatile ahead of Friday’s OPEC meeting.
U.S. crude fell 1 per cent to $64.67 per barrel and Brent was last at $74.70, down 0.8 per cent on the day.
Reuters