Stocks Decline as Trump Reloads the Tariff Bazooka: Markets Wrap

Publikuota: 2018-07-11 09:45
U.S. President Donald Trump and first lady Melania Trump arrive aboard Air Force One ahead of the NATO Summit, at Brussels Military Airport in Melsbroek, Belgium July 10, 2018. REUTERS/Francois Lenoir     TPX IMAGES OF THE DAY
U.S. President Donald Trump and first lady Melania Trump arrive aboard Air Force One ahead of the NATO Summit, at Brussels Military Airport in Melsbroek, Belgium July 10, 2018. REUTERS/Francois Lenoir TPX IMAGES OF THE DAY
 

Stocks in Asia declined with U.S. equity futures, industrial metals and China’s yuan after the Trump administration released the biggest list yet of Chinese goods it may hit with tariff increases, a move that China said will force it to retaliate.

Equities in Japan, China and Hong Kong bore the brunt of selling after the U.S. released a proposed list of $200 billion of Chinese imports to be hit by tariff increases. U.S. futures also fell, ending the positive tone to equities enjoyed at the start of the week thanks to optimism about the corporate-earnings season. The reaction was more muted in the currency and bond markets, with the yen giving up initial gains and some emerging currencies holding up even as the yuan retreated. Treasury yields ticked higher while copper, nickel and zinc all slumped.

China’s Commerce Ministry described the U.S. move as “totally unacceptable” bullying, and promised to lodge complaints at the World Trade Organization without detailing what its retaliatory steps would be. One pattern seen so far in the escalating battle between the world’s top two economies is that the tensions have hit Chinese shares harder than American ones -- they are now in a bear market, while the S&P 500 is within 3 percent of a record high.

A bumper corporate earnings season could still support sentiment, with expectations that strong results can complement a recent run of positive economic data and overshadow growth concerns stemming from the trade tensions.

“In the short run it’s very difficult to see what’s going to bring an end to this escalation of tit-for-tat,” Richard Turnill, chief investment strategist at BlackRock Inc., told Bloomberg TV in Hong Kong. “It’s those increasing concerns that are going to weigh on market returns and force investors increasingly to look for more resilience in their portfolios.”

Elsewhere, oil dropped below $74 a barrel, even as an industry report was said to show shrinking U.S. crude stockpiles. Emerging-market currencies were largely weaker against the greenback.

These are some events to look out for this week:

Earnings season gets going with JPMorgan Chase & Co. and Citigroup Inc. among the largest companies due to give results, as well as India’s Infosys Ltd. The most noteworthy U.S. data may be the June inflation report on Thursday, which consensus expects will show both headline and core price growth picking up. There’s another deluge of Treasury debt sales too, with a total $156 billion of notes and bills offered. Chinese trade data due at the end of the week will probably show slightly slower export growth, after early indicators pointed to softer overseas demand and weaker export orders, Bloomberg Economics said.

Here are the main market moves: Stocks

Futures on the S&P 500 were down 0.8 percent as of 3:24 p.m. in Tokyo after dropping as much as 1.1 percent earlier. Futures on the U.K.’s FTSE 100 declined 0.7 percent. Japan’s Topix index dropped 0.8 percent. Hong Kong’s Hang Seng fell 1.6 percent and the Shanghai Composite lost 2.2 percent. South Korea’s Kospi dropped 0.6 percent.

Currencies

The Bloomberg Dollar Index was up 0.2 percent The Japanese yen was flat at 111.05 per dollar, compared with 111.27 before the tariff report came out. The offshore yuan fell 0.4 percent to 6.67 per dollar. The euro was little changed at $1.1734.

Bonds

The yield on 10-year Treasuries slipped about one basis point to 2.83 percent. German 10-year bund yields rose about five basis point to 0.367 percent.

Commodities

West Texas Intermediate crude slid 0.6 percent to $73.69 a barrel. Copper futures in London lost 1 percent to $6,332.5 a ton. Gold lost 0.3 percent to $1,252.15 an ounce.

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