Dow Plunges As Wall Street Reacts To Trade Doubt, US Economy Concerns

Cornelia Mascio
Agosto 13, 2019

Trade-related worries have been a major drag on the benchmark S&P 500, which has slipped 3.7% from its all-time high hit in July. The Nasdaq Composite dropped 51.65 points, or 0.65%, to 7,907.49 at the opening bell.

Futures on the S&P 500 Index declined 0.5 per cent as of 11:15 a.m. London time. Futures on the S&P 500 added 0.3%. The People's Bank of China late Friday called for a rational view on current headwinds, and former central bankers warned that the confrontation with the U.S.is deepening.

Uncertainty as to whether China intends to weaponize the yuan down the road still remains and hasn't been deterred by the continuing weakening of the currency.

Trade tensions spiked earlier this month after President Donald Trump vowed to impose a 10% tariff on $300 billion of U.S. imports from China. The rhetoric follows the announcement earlier this month (link) that the USA planned to implement a 10% tariff on the $300 billion in annual Chinese exports that have so far avoided new trade duties. "The consumer has acted as the engine driving forward this record-long expansion as manufacturing slows, but these tariffs may erode their spending power", he added.

The Dow closed 391 points lower on Monday with stocks heading south early in the session after Hong Kong International Airport cancelled all departures for the day on the back of serious disruptions linked to the intensifying protests.

Meanwhile, worries are growing over the economic impact of the trade war; Goldman Sachs has cut its Q4 US growth forecast by 20 bps to 1.8%. The firm now expects fourth-quarter U.S. growth to slow to 1.8%, compared with 2% previously. Traders have been increasing bets for central bank easing in recent weeks as the USA and China escalate their trade war and a slew of global data point to slowing growth.

FactSet said that the blended earnings decline for the second quarter stood at 0.7%, a measure that combines actual results for companies that have reported and estimated results for companies that have yet to report.

The Bloomberg Dollar Spot Index increased 0.2 per cent. The food purveyor says EPS and revenue are up on strong demand. Micron Technology Inc, Nvidia Corp and Advanced Micro Devices Inc fell between 0.6% and 1.5%.

Troubled Canadian cannabis company CannTrust Holdings Inc. fell around 26% after disclosing it had received a report from Health Canada informing it that its manufacturing facility in Vaughan, Ontario, wasn't compliant (link) with certain regulations.

A volatile start to August for global markets has seen bond traders lift expectations for central-bank easing. The Hong Kong Hang Seng shed -0.44% after the Hong Kong Airport was shut down. European stocks were trading lower Monday, down 0.2%, as measured by the Stoxx Europe 600.

West Texas Intermediate crude fell 0.3% to $54.79 a barrel.

The offshore yuan was stable at 7.0993 per dollar.

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