Stocks Drop as Hopes for a Trade Truce Fade
September 24 2018 - 5:40AM
Dow Jones News
By Christopher Whittall
Global stocks mostly headed lower Monday as tensions over
tariffs remained front and center for investors after China
canceled trade talks with the U.S.
The Stoxx Europe 600 was 0.3% lower, weighed down by auto
stocks. Futures markets pointed to a 0.1% opening loss for the
S&P 500. Stock indexes across the Asia-Pacific declined, though
markets in China, Japan and South Korea were closed for public
holidays.
Monday's moves followed a solid week for global stocks, with the
Dow Jones Industrial Average and S&P 500 both hitting new
records and China' Shanghai Composite Index notching its biggest
weekly gain in over two years.
That came despite an escalation in trade tensions between the
world's two largest economies after the Trump administration
announced a further $200 billion of tariffs on Chinese imports,
which are set to kick in today. Nonetheless, most investors took
the view that the conflict would ultimately be resolved, helping
lift markets around the world.
That positive momentum showed signs of stalling Monday after
China pulled out of trade talks with the U.S. slated for this week,
suggesting a resolution to the conflict could be some way off.
Fabrizio Quirighetti, co-head of multiasset at SYZ Asset
Management, is looking through the near-term headlines in the
belief that the U.S. and China will reach an agreement after the
midterm elections in November.
Having favored U.S. stocks over the summer--which pushed higher
thanks to a resilient domestic economy--he is now buying equities
in other regions including Europe, where he thinks growth is
firming after a slowdown earlier in 2018.
"We have become more constructive on the rest of the world,"
said Mr. Quirighetti.
Rising oil prices provided some support for European markets
Monday. Brent crude oil prices gained 2% to $79.79 a barrel after a
Sunday meeting of oil-producing countries failed to produce a
consensus on how to contain prices.
The Stoxx Europe 600 oil & gas subindex was up 0.9%.
Mergers and acquisitions also drove European markets, with
shares in Sky PLC rising nearly 9% after Comcast Corp. outbid 21st
Century Fox Inc. to buy the European pay-TV giant.
Shares in Randgold Resources Ltd rose nearly 4% on the news that
Barrick Gold Corp. had agreed to buy the company in an all-share
merger that will create the world's largest gold miner.
The biggest losers were car makers, with the Stoxx Europe 600
autos & parts subindex down 1.1%. Auto manufacturers are one of
the industries most exposed to global trade tensions.
There were signs of last week's positive momentum reversing in
Asia, though many markets were closed. Hong Kong's Hang Seng Index
slumped 1.6% after rising 2.45% last week. Australia's S&P/ASX
200 declined 0.1%.
Investors' attention will return to central banks this week,
with the Federal Reserve due to release its policy statement
Wednesday. The Fed is on track to raise interest rates amid solid
U.S. growth, while investors will look for clues on the path of
rate increases in 2019.
"We don't think there'll be a dovish surprise coming out of the
meeting, " said Ian Samson, markets research analyst at Fidelity
International.
In bond markets, the yield on the 10-year Treasury note hovered
near a seven-year high at 3.08%, according to Tradeweb. Treasury
yields rose last week as investors embraced risk and sold haven
assets, settling at 3.068% Friday.
In currencies, the WSJ Dollar Index, which measures the buck
against a basket of 16 other currencies, was flat recently.
The British pound was up 0.3% against the dollar following a
steep fall on Friday after Brexit negotiations between the U.K. and
the European Union reached an impasse.
Write to Christopher Whittall at
christopher.whittall@wsj.com
(END) Dow Jones Newswires
September 24, 2018 05:25 ET (09:25 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.