Stocks Slump, Bonds Rally as Trade Tensions Rise: Markets Wrap

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Stocks Slump, Bonds Rally as Trade Tensions Rise: Markets Wrap(Bloomberg) -- Stocks slumped and bonds rallied in the wake of President Donald Trump’s move to escalate the trade war, with China pledging “countermeasures” if the U.S. steps up tariffs on its goods.U.S. equity futures indicated a weak opening on Wall Street ahead of the monthly payrolls report, though contracts came off earlier session lows. The Stoxx Europe 600 index fell the most since December, led by automakers and miners. Ten-year U.S. yields fell further and the dollar was little changed after each saw declines Thursday. German 30-year bonds rallied to send yields across the whole of its debt market below 0% for the first time.In Asia, Japanese and Korean benchmarks slumped amid a trade spat between the neighbors, with a yen rally also weighing on the former’s stocks. China’s onshore yuan hit the weakest point since November.While China has yet to offer details on what measures it would take, the sudden escalation of the trade war has put markets in a spin in an already action-packed week of corporate earnings and central-bank meetings. The developments come after the Federal Reserve chief cast doubt about a long cycle of interest-rate cuts, provoking the president’s ire and disappointing many investors.“The question for investors is whether this is the first step in a series of escalations or a negotiating stance that will compel China to make concessions and the Fed to ease,” said Steve Englander, global head of FX research at Standard Chartered Bank. “If the president can elicit concessions from both China and the Fed, it would be a double win from his perspective.”Elsewhere, crude oil clawed back some of its 8% slide on Thursday. Gold gave up some of the previous day’s gains. Most European government bonds rose alongside the common currency. The pound drifted after a by-election loss reduced U.K. Prime Minister Boris Johnson’s House of Commons majority to a single seat.Here are some of the key events to watch as the week unfolds:The U.S. July jobs report is due Friday.And here are the main moves in markets (all sizes and scopes are on a closing basis):StocksFutures on the S&P 500 Index dipped 0.3% as of 8:00 a.m. New York time, hitting the lowest in five weeks.The Stoxx Europe 600 Index sank 1.9%, the biggest tumble in eight months.The U.K.’s FTSE 100 Index sank 1.8%, the largest tumble in 19 weeks.Germany’s DAX Index sank 2.6%, the lowest in two months.The MSCI Asia Pacific Index sank 1.4%, the lowest in more than six weeks.CurrenciesThe Bloomberg Dollar Spot Index was little changed.The euro rose 0.2% to $1.1104.The British pound was unchanged at $1.2128.The Japanese yen climbed 0.5% to 106.84 per dollar, the strongest in almost 16 months.BondsThe yield on 10-year Treasuries dipped four basis points to 1.86%, reaching the lowest in almost three years on its sixth straight decline.Britain’s 10-year yield declined four basis points to 0.552%, hitting the lowest in about three years.Germany’s 10-year yield declined four basis points to -0.49%, reaching the lowest on record.CommoditiesGold dipped 0.5% to $1,437.51 an ounce.West Texas Intermediate crude climbed 2.5% to $55.29 a barrel, the biggest increase in more than three weeks.\--With assistance from Cormac Mullen.To contact the reporter on this story: Laura Curtis in London at lcurtis7@bloomberg.netTo contact the editors responsible for this story: Samuel Potter at, Namitha JagadeeshFor more articles like this, please visit us at©2019 Bloomberg L.P.

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