U.S. Stocks Fluctuate, Bonds Gain on Trade Angst: Markets Wrap

LAGOS (Capital Markets in Africa) – Trade angst whipsawed financial markets Thursday, with U.S. stocks swinging wildly and Treasuries resuming a rally that pushed the 30-year yield below 2% for the first time. Stimulus hopes in Europe weakened the euro.

The S&P 500 attempted to bounce back from one of its worst days of the year, boosted by strong earnings from Walmart Inc. and solid data on the American consumer. Tapestry Inc. tumbled on poor sales, adding to retailer woes after Macy’s missed estimates. General Electric sank more than 10% on accusationsof financial fraud, while Cisco Systems fell the most in two years after blaming a slowing global economy for a weak outlook.

The trade war hung over markets, with discordant headlines sending risk assets on a wild ride throughout the American morning. Stocks sold off after China said it would retaliate against fresh tariffs before bouncing back after official comments struck a more conciliatory tone. President Donald Trump added to concern by saying any deal with China must be “on our terms.”

European assets took a jolt when a top official at the European Central Bank said stimulus measures would exceed investor expectations next month, according to a Dow Jones report. The common currency turned lower against the the dollar and stocks erased losses.

The morning volatility continued a bout of turmoil sparked two weeks ago when Trump escalated his trade war with China. The uncertainty the rising tensions caused and growing signs of a slowing global economy inverted a key version of the U.S. Treasury yield curve for the first time in 12 years, exacerbating the flight from risk assets.

“It’s a tough week with markets as volatile as they are,” said John Roe, the head of multi-asset funds at Legal & General. “Fundamentals are playing a central role but it’s not helped by trade war politics. Markets seemed calmer today after Trump’s more positive tone yesterday, but now China’s upping the rhetoric and it’s becoming a case of he said-Xi said.”

Elsewhere, the Australian dollar rose after a stronger-than-expected jobs report prompted traders to trim bets of another interest-rate cut. Oil extended a decline as a surprise gain in U.S. crude stockpiles added to deepening concerns over the outlook for global demand.

Source: Bloomberg Business News