Stock market today: S&P 500 climbs as health care, tech gain; Nvidia earnings loom
(Updates through afternoon U.S. trading.)
By David Randall
NEW YORK, May 29 (Reuters) - Fears that an escalating trade
war between the United States and China will slash global
economic growth pulled world stock markets down to near
two-and-a-half-month lows on Wednesday and continued to feed a
rally in safe-haven government bonds.
German bond yields fell deeper into negative territory and
inched toward record lows of minus 0.2%. Ten-year U.S. Treasury
note yields dropped to 20-month lows, having fallen almost 30
basis points this month.
Chinese newspapers warned on Wednesday that Beijing could
use rare earths to strike back at the United States after U.S.
President Donald Trump remarked he was “not yet ready” to make a
deal with China over trade. China was the source of 80 percent
of the rare earths imported by the United States between 2014
and 2017. The prospect of a prolonged standoff between the world's two
biggest economies and the likelihood of Europe and Japan getting
dragged in have raised investor concerns about global growth.
With economic data showing that U.S. manufacturing growth
dropped to 10-year lows, another round of tariffs would sharply
raise the risk of a U.S. recession, said Justin Onuekwusi, a
fund manager at Legal & General Investment Management.
“The market is simply calculating what the impact will be of
the next set of tariffs as it doesn't look like the rhetoric is
calming down,” Onuekwusi said.
“Then we have a weaker growth outlook ... so we have the
negative shock of trade added to lower growth and the cushion of
protection isn't as good as it was eight to nine months ago.”
Those concerns dragged MSCI's global equity index
.MIWD00000PUS down 0.9% to a 2 1/2-month low following losses
across Asia.
On Wall Street, the Dow Jones Industrial Average .DJI fell
271.44 points, or 1.07%, to 25,076.33, the S&P 500 .SPX lost
20.96 points, or 0.75%, to 2,781.43 and the Nasdaq Composite
.IXIC dropped 54.48 points, or 0.72%, to 7,552.87.
The pan-European STOXX 600 index .STOXX lost 1.43%.
Concerns over the fate of Britain's exit from the European
Union also helped drive U.S. 10-year yields about 10 basis
points below the three-month rates, an inversion typically seen
as a leading indicator of a recession. The inversion is the
deepest in almost 12 years.
“What I see as more consistent is that typically when the
yield curve inverts you get central bank easings. So the
question about recession would be: would the U.S. Fed ease
enough to avoid a recession?” said Chris Rands, Sydney-based
fixed income portfolio manager at Nikko Asset Management.
Data this week showed a gauge of U.S. manufacturing activity
unexpectedly fell in May from the previous month. That follows
earlier disappointing readings on U.S. manufacturing and
industrial output, Rands added.
“The fact that you have got a bit more noise around the
trade war now at the same time as manufacturing is rolling over
— it's getting people to think that things are a little bit
worse than they had expected,” he said.
Currency activity was muted, with the dollar index .DXY ,
tracking the U.S. unit against six major currencies, up at
97.905. The dollar is on track for a fourth month of gains,
benefiting from flows away from markets such as Asia that are
considered at greater risk from trade wars.
The euro was unchanged at $1.1159 after falling two straight
days. The British pound held at $1.2656.
Commodity markets were also dominated by fears of a global
economic downturn. Brent crude was off more than 1% at $69.15
per barrel. Gold benefited from the safe-haven bid, rising half
a percent to $1.285 an ounce.
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GRAPHIC-Global assets in 2019 http://tmsnrt.rs/2jvdmXl
GRAPHIC-Global currencies vs dollar http://tmsnrt.rs/2egbfVh
GRAPHIC-Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
Bond market rate cut beats Fed to the punch ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>