Stocks Slump, Dollar Rises as Trade Worries Deepen: Markets Wrap

NEW YORK (Capital Markets in Afrioca) – Stocks slumped globally on Thursday as the simmering trade dispute between the world’s two largest economies took a greater toll on markets. Safe assets were in demand, with gold and the yen gaining alongside the dollar and Treasuries.

S&P 500 futures pointed to a big drop at the New York open after the Communist Party’s flagship newspaper published two commentaries assailing American moves to curb Chinese companies. Tesla sunk to below $185 in premarket trading, setting it up for a seventh day of losses. The Stoxx Europe 600 Index headed for its worst day in two weeks as automakers tumbled after an EU official said the U.S. was unlikely to start trade talks with the bloc soon while it’s preoccupied with China. Casino Guichard-Perrachon was suspended from trading in Paris, fueling talk of a debt restructuring.

The pound weakened against the euro for a record 14th day as the prospect of Prime Minister Theresa May being forced from power brought yet more uncertainty over the U.K.’s Brexit strategy. The common currency dipped against the dollar as measures of German business confidence and euro-area output missed expectations, and as voting got underway in European elections.

Risky assets remain under pressure and havens in demand as investors dig in for what looks like a protracted dispute between China and the U.S. over trade. One expert predicts tensions could endure until 2035, while economists are also turning more pessimistic. Goldman Sachs Group Inc. now sees higher oddsof a stalemate between the two nations, and Nomura Holdings Inc. has shifted to forecasting a full-blown escalation of tariffs.

“We don’t think that there is an overnight solution,” said James Johnstone, co-head of emerging and frontier markets at RWC Partners LLC. “The accommodation of China as a rising power is something that the Americans and the West have been contemplating for a long time. This will be a 20-30 year accommodation.”

Markets need to adjust to the “new normal” on trade, says Thrushka Maharaj of JPMorgan Asset Management.

Elsewhere, the Aussie declined and China’s yuan dipped even after the People’s Bank of China set its daily fixing at a stronger-than-expected level for a fourth straight day. West Texas crude oil fell below $61 a barrel after inventory data showcased supply concerns. Commodities added to their drop on Wednesday, when they slumped across the board as traders increasingly girded for a full-blown trade war.

Source: Bloomberg Business News