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GLOBAL MARKETS-Stocks, oil tumble as Trump escalates trade war with China

Published 01/08/2019, 22:01
Updated 01/08/2019, 22:10
GLOBAL MARKETS-Stocks, oil tumble as Trump escalates trade war with China
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(Updates to U.S. market close)
* USD falls vs yen; euro and sterling hit 2-1/2-year lows
* Emerging-market stocks post 7th session of losses
* 10-year U.S. yield under 1.9%; lowest since Trump elected

By Rodrigo Campos
NEW YORK, Aug 1 (Reuters) - U.S. President Donald Trump sent
financial markets reeling on Thursday when he announced
additional tariffs on Chinese products, as traders worried not
only about the escalation of the trade war but also the effect
on the independence of the U.S. central bank.
A more than 1% gain in U.S. stocks evaporated within
minutes, U.S. crude fell as much as 8% and emerging market
stocks tumbled to a six-week low.
Trump moved to impose a 10% tariff on $300 billion in
Chinese imports starting next month, with a list that includes
consumer goods ranging from cell phones and laptop computers to
toys and footwear. The trade war has disrupted global supply chains and roiled
financial markets for more than a year. Thursday's sharp markets
reaction to Trump's tweeted announcement added to already
heightened volatility a day after the U.S. Federal Reserve cut
interest rates for the first time in over a decade, in what was
dubbed a "hawkish rate cut."
After the Fed lowered its benchmark rate by 25 basis points
on Wednesday, Chairman Jerome Powell said the central bank's
move was "not the beginning of a long series of rate cuts."
Trump said he was disappointed in Powell after he had called
for a more dovish stance at the Fed, but his tariff announcement
had the effect he wanted on the outlook for interest rates.
Traders have raised the odds for two more interest rate cuts by
year's end, and are increasing bets the Fed will need to ease
policy further next year to offset risks from the escalating
trade war. "Obviously more tariffs are a negative just in terms of
trade and the global economy. But also it looks like the
president is bullying the chairman of the Federal Reserve in
order to wage his trade war, so that should not play well with
the market. The market should not appreciate that," said Michael
O'Rourke, chief market strategist at JonesTrading in Greenwich,
Connecticut.
After rising more than 1% intraday, the Dow Jones Industrial
Average .DJI fell 280.85 points, or 1.05 percent, to
26,583.42, the S&P 500 .SPX lost 26.82 points, or 0.90
percent, to 2,953.56 and the Nasdaq Composite .IXIC dropped
64.30 points, or 0.79 percent, to 8,111.12.
The Wilshire 5000 total U.S. market index .W5000 lost $325
billion in market capitalization.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.72 percent after having risen 0.5% earlier in the session.
Emerging market stocks lost 1.20%. Futures in Japan's Nikkei
NKc1 lost 1.50 percent.
The trade war between the world's two largest economies has
been a lingering weight on oil prices, and the market sharply
reversed its recent run-up.
"The U.S.-China trade war has damaged the energy demand
outlook greatly, already, and this will only add to those
concerns," said John Kilduff, partner at Again Capital
Management. "The trade war is clearly far from over."
U.S. crude CLc1 fell 6.98 percent to $54.49 per barrel and
Brent LCOc1 was last at $61.09, down 6.09 percent on the day.
Commodities tumbled across the board, with the CRB index
.TRCCRB down 3.2%, its largest daily decline since November
2014.
U.S. Treasury yields across all maturities fell sharply,
with the benchmark 10-year note hitting its lowest since
November 2016.
"Trump's threat of more tariffs is going to be a continued
negative factor for the global economy. Treasuries (prices)
should be able to maintain this support," said John Canavan,
lead analyst at Oxford Economics in New York.
The 10-year note US10YT=RR last rose 1-3/32 in price to
yield 1.9003 percent, from 2.021 percent late on Wednesday.


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GRAPHIC-Pound has taken a pounding this year https://tmsnrt.rs/2MzIqTp
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
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