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US stocks slammed as trade war escalates
NEW YORK, Aug 24, 2019 (BSS/AFP) – Wall Street stocks finished a bruising
session sharply lower Friday, as fresh volleys between Washington and Beijing
escalated a grinding trade war and exacerbated recession fears.
The Dow sank more than 600 points, or 2.4 percent, to 25,628.90, pushing
the blue-chip index into the red for the fourth straight week.
European stocks also had a rocky day, turning sharply downward after US
President Donald Trump vowed a forceful response to a Chinese announcement
raising tariffs on $75 billion in US goods.
Trump followed through on the threat after the US market closed Friday,
raising the existing and planned tariffs by five percent. Tariffs on $250
billion Chinese goods will go to 30 percent and those planned on $300 billion
in Chinese goods go to 15 percent from October 1.
Gorilla Trade strategist Ken Berman said that “until now, the majority of
analysts expected a deal, but the steep drop in risk assets shows that
investors started to ‘price in’ the possibility of a prolonged conflict.”
The escalation of the trade war comes amid rising recession fears, with
Britain and Germany both reporting negative growth in the second quarter and
China’s economy slowing. Strong consumer spending has buoyed the US economy,
even as manufacturing has sagged.
The tit-for-tat trade announcements come ahead of a G7 summit this weekend
in France, with tensions mounting between Trump and the Europeans, Canada and
Japan over trade tariffs.
– Trade war upstages Fed –
Heading into Friday’s session, markets had been expecting a key speech
from Federal Reserve Chair Jerome Powell to be the major focus of the
session.
Powell pledged to act to ensure that the US economic expansion continues
and made a case for further stimulus in the absence of inflation, but he
avoided specific promises, including Trump’s call for deep interest rate
cuts.
Stocks advanced after Powell’s remarks, with major indices briefly pushing
into positive territory.
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But markets reversed course abruptly after Trump fired off a series of
tweets blasting Powell for not announcing fresh rate cuts and hitting out at
China. And a key recession warning signal again flashed red, with 10-year
Treasury bond yields falling below 2-year yields, an indication of waning
confidence.
“As usual, the Fed did NOTHING!” Trump said.
“My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?”
Trump said, misspelling the Fed chief’s name and referring to Chinese leader
Xi Jinping.
Trump also ripped into China, saying “we don’t need China and, frankly,
would be far… better off without them.”
The US president on Twitter also said he was “ordering” US companies to
stop doing business in China after Beijing announced it would impose new
tariffs on $75 billion in US goods.
“Our great American companies are hereby ordered to immediately start
looking for an alternative to China,” Trump tweeted.
Art Hogan, chief market strategist at National Securities, said the
mandate to US companies to exit China may amount to little more than
rhetorical bluster, but was an unwelcome sign “things are getting worse, not
better” on trade.
Hogan characterized Trump’s latest attack on Powell as far more severe
even than earlier broadsides.
“When the president attacks his own nominated chair and calls him an
enemy, that is a whole new flavor of aggression, and not one any of us have
seen in our lifetime,” Hogan said.
– Key figures around 2100 GMT –
New York – Dow: DOWN 2.4 percent at 25,628.90 (close)
New York – S&P 500: DOWN 2.6 percent at 2,847.11 (close)
New York – Nasdaq: DOWN 3.0 percent at 7,751.77 (close)
London – FTSE 100: UP 0.5 percent at 7,094.98 (close)
Frankfurt – DAX 30: DOWN 1.2 percent at 11,611.51 (close)
Paris – CAC 40: DOWN 1.1 percent at 5,326.87 (close)
EURO STOXX 50: DOWN 1.2 percent at 3,334.25 (close)
Tokyo – Nikkei 225: UP 0.4 percent at 20,710.91 (close)
Hong Kong – Hang Seng: UP 0.5 percent at 26,179.33 (close)
Shanghai – Composite: UP 0.5 percent at 2,897.43 (close)
Pound/dollar: UP at $1.2290 from $1.2251 at 2100 GMT
Euro/dollar: UP at $1.1145 from $1.1080
Euro/pound: UP at 90.68 pence from 90.44 pence
Dollar/yen: DOWN at 105.39 yen from 106.44 yen
Brent North Sea crude: DOWN 1.0% at $59.34 per barrel
West Texas Intermediate: DOWN 2.1% at $54.17per barrel
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