Published: Wed, August 14, 2019
Finance | By Loren Pratt

U.S. stocks tumble on trade war, weakening outlook

U.S. stocks tumble on trade war, weakening outlook

Lower open expected for Wall Street Tuesday after the USA stock index futures looked lower on Tuesday morning.

Shorter-dated U.S. Treasury yields have edged higher after consumer price data showed steady growth as expected, but the compression in yields continues with the two-year yield up 4 bps to 1.62% and the 10-year yield up a basis point to 1.65%; U.S. Dollar Index +0.1% to 97.43.

However, surging USA shale oil production is hitting efforts to limit the global supply overhang pulling prices down. Cathay Pacific, Hong Kong's dominant airline, received a letter on Friday from China's civil aviation agency asking the company to share information on crew members flying to China.

As of 1230 BST, Dow futures were down 0.12%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.09% and 0.14% lower, respectively.

The worsening state of the trade war between US and China weighed heavily on sentiments of Wall Street investors, who fled stocks Monday sending the Dow Jones Industrial Average plunging 391 points, or 1.49%, to 25,896.44. -China trade war stoked fears of impending recession.

Stocks in Asia slipped on Tuesday as tensions escalated in Hong Kong amidst reports that China's military may step in and quell the protests.

Australia's S&P/ASX 200 Index contracts declined 0.8%. Financial stocks took the biggest hit, with consumer discretionary shares also falling. The narrowing of the yield curve kept gains in check, as the recession signal emanating from the bond market grew louder. The offshore yuan added 0.1% to 7.0914 per dollar.

Every sector within the S&P 500 declined on Monday.

Meanwhile, gold prices zoomed to the highest in more than six years on Tuesday after investors shunned riskier assets and sought the comfort of gold and other safe assets.

The Bloomberg Dollar Spot Index rose less than 0.1%.

During the past month, the rhetoric from Beijing and Washington has increased after US President Donald Trump slapped 10% tariffs on Chinese imports worth another US$300 billion.

At the weekend, Trump upped the ante with Beijing into what is becoming a new Cold War when he made it clear that planned trade talks with China in the U.S. next month could be shelved after resuming in July.

Investors are concerned Trump's new 10% tariff on China to be imposed September 1 will preclude any trade deal being made within the year while worsening the trade war. Viacom shares fell 4.4%.

China-sensitive stocks including Caterpillar, Deere and Boeing all declined more than 1%. The SPDR S&P Bank ETF was 2.1% lower Monday.

USA stocks dipped in a broad sell-off on Monday as rising geopolitical tensions spooked investors away from equities and the extended U.S.

Spanish stocks, particularly banks which have exposure to Latin America, underperformed as investors dumped Argentine assets on worries over the return of populist policies after President Mauricio Macri was trounced in presidential primaries.

US West Texas Intermediate futures fell 0.33 per cent to US$54.75 a barrel. Brent crude oil, the global standard, added 4 cents to close at $58.57 a barrel. Brent crude, used to price global oils, declined 11 cents to $58.46 per barrel in London. Gold headed higher above $1,500 an ounce.

The yen last fetched 105.37 per dollar, and was within striking distance of 105.03, its strongest since the January 3 flash crash.

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