Stocks slump, Treasuries gain as sell-off resumes

Trade tensions reignited after the arrest of the chief financial officer of tech giant Huawei Technologies Co. -- dousing hope China and the US would make immediate progress on a deal.

Dec 06, 2018 12:12 IST India Infoline News Service

US equity futures tumbled alongside stocks in Europe and Asia as concern resurfaced that trade tensions between the world’s two largest economies are far from resolved. Oil slid as OPEC ministers met in Vienna.

Contracts on the Dow Jones Industrial Average sank more than 450 points, while S&P 500 futures signaled the underlying index will resume its slide after one of the biggest routs of the year.

Trade tensions reignited after the arrest of the chief financial officer of tech giant Huawei Technologies Co. -- dousing hope China and the US would make immediate progress on a deal.

The yuan dropped the most since October. The start of the futures session was marred by a sudden and unexpected plunge that sent a shock wave across equity markets.

In the latest in a series of ugly days, these were some of the stand-out moves:
  • Contracts for the Dow Jones and S&P 500 indexes both dropped 1.8 %; those for the Nasdaq fell 2.3%
  • The Stoxx Europe 600 tumbled 2.3% to the lowest in almost two years
  • West Texas crude at one point fell below $51 after Saudi Energy Minister Khalid Al-Falih said OPEC hasn’t yet reached a deal on production cuts
  • Treasuries rose again as investors opted for safety, sending the benchmark yield to 2.89%
  • The MSCI Asia Pacific Index posted its worst day in six weeks

Whether or not it triggered the slide, Canada’s arrest of the Huawei CFO and reports it may extradite her to the US are a blow to already fragile sentiment, just days after an apparent breakthrough on trade between America and China.

 “This move against the Huawei CFO has just added another spanner in the works,” Eleanor Creagh, strategist at Saxo Capital Markets, told Bloomberg TV in Sydney. “It’s really illustrative of the fact that the trade truce we saw over the weekend between Trump and Xi doesn’t really do much to mend the underlying relationship between the US and China that is still deteriorating.”

Elsewhere, Bank of Japan Governor Haruhiko Kuroda said economic risks from abroad could be severe, and the US Federal Reserve’s Beige Book report showed fading optimism over growth prospects at US firms even as most districts continued to report a modest expansion.

The pound drifted as UK Prime Minister Theresa May searched for a compromise to avoid a crushing defeat on her Brexit deal in a key vote in Parliament next week.

“There are so many forces weighing against markets right now, whether it’s the China slowdown, weak European data, Fed hikes, uncertainty around trade and now Brexit as well,” Bilal Hafeez, head of fixed-income research for EMEA at Nomura, told Bloomberg TV. “We really need to see some stabilization in any of those factors to see markets stabilize now.”

Some key events this week:
  • OPEC ministers meet in Vienna on Thursday.
  • Friday brings the US monthly employment report for November.
  • China November trade data are due on Saturday.
Here are the main moves in markets:

Stocks
  • Futures on the S&P 500 Index fell 1.8% as of 6:44 am New York time, the lowest in almost two weeks.
  • The Stoxx Europe 600 Index sank 2.3% to the lowest in two years on the biggest tumble in 10 months.
  • The UK’s FTSE 100 Index sank 2.5% to the lowest in two years on the largest tumble in 10 months.
  • Germany’s DAX Index decreased 2.5% to the lowest in two years on the biggest dip in 10 months.
  • The MSCI Asia Pacific Index declined 1.8% to the lowest in almost two weeks on the largest drop in six weeks.
  • The MSCI Emerging Market Index dipped 2.2% to the lowest in more than a week on the biggest decrease in more than six weeks.
Currencies
  • The Bloomberg Dollar Spot Index climbed 0.1% to the highest in more than a week.
  • The euro fell less than 0.05% to $1.1342.
  • The British pound increased 0.1% to $1.2747.
  • The Japanese yen gained 0.4% to 112.74 per dollar, the strongest in more than two weeks.
Bonds
  • The yield on 10-year Treasuries fell two basis points to 2.89%, hitting the lowest in three months with its sixth straight decline.
  • Germany’s 10-year yield decreased three basis points to 0.25%, the lowest in more than 17 months.
  • Britain’s 10-year yield dipped three basis points to 1.281%, the lowest in more than 14 weeks.
  • The spread of Italy’s 10-year bonds over Germany’s rose nine basis points to 2.8777 percentage points.
Commodities
  • West Texas Intermediate crude fell 2.9% to $51.33 a barrel, the largest fall in almost two weeks.
  • Gold fell less than 0.05% to $1,236.89 an ounce.
Source: Bloomberg

Related Story