Dow drops 450 points. Trade war fears just won't go away

Cornelia Mascio
Agosto 13, 2019

The sell-off adds to losses the market racked up last week amid heightened anxiety over the U.S. China-trade war that is stretching from the tradings desks of Wall Street to the soybean and corn fields of Iowa.

All three major US stock indexes started the week in the red, with few earnings reports and no economic data to soothe market jitters over protests in Hong Kong, the rejection of Argentine President Mauricio Macri's economic agenda in primary elections, and a tariff dispute that has beleaguered markets for months.

"The global economy is perched precariously, hoping for a positive inflection, but braced for a stumble", said Vishnu Varathan of Mizuho Bank in a report.

Elsewhere, Tokyo's benchmark Nikkei-225 index dropped 1.11% with Sydney's ASX 200 shedding 0.33% and Seoul's Kospi falling 0.9%.

The protests began in opposition to a bill allowing extraditions to mainland China but have quickly morphed into the biggest challenge to China's authority over the city since it took Hong Kong back from Britain in 1997.

Coach owner Tapestry Inc (TPR.N) and Versace owner Capri (CPRI.N) dropped 3.9% and 4.4%, respectively, after Chinese social media criticized the companies for selling T-shirts that showed Chinese-controlled territories of Hong Kong and Macau as countries.

The Dow closed 1.5% lower, at 25,896.

The downward trend continued in Jakarta, Taipei, Bangkok and Wellington while the Shanghai Composite slipped 0.63% and the Shenzhen Component declined 0.85%.

The Dow saw a 0.8% fall last week to end Friday at 26,287.44, while the S&P saw a 0.5% weekly fall to 2,918.65.

Trump has said he'd be "fine" if the US and China don't go ahead with a meeting next month, dampening investors' hopes for a path to resolving the economically damaging trade war.

Technology, health care and consumer discretionary sector stocks accounted for much of the market's decline.

Meanwhile, gold prices zoomed to the highest in more than six years on Tuesday after investors shunned riskier assets and sought the comfort of gold and other safe assets.

Trade tensions spiked earlier this month after President Donald Trump vowed to impose a 10% tariff on $300 billion of United States imports from China. Trump's pledge to tax the remaining $300 billion worth of Chinese imports goes into effect on September 1.

"There are just negative stories from every corner of the globe you look at, not independently, but when you piece them together it becomes overtly negative". Shares fell 0.4% Monday.

Spanish stocks, particularly banks which have exposure to Latin America, underperformed as investors dumped Argentine assets on worries over the return of populist policies after President Mauricio Macri was trounced in presidential primaries. European stocks were trading lower Monday, down 0.2%, as measured by the Stoxx Europe 600.

Second-quarter earnings season will be all but in the books after this week.

In midday trading, London's FTSE 100 lost 0.4% to 7,195 and France's CAC 40 was 0.4% lower at 5,287.

China-sensitive stocks including Caterpillar, Deere and Boeing all declined more than 1%. Viacom shares fell 4.4%.

US West Texas Intermediate futures fell 0.33 per cent to US$54.75 a barrel.

The contract gained 43 cents on Monday to close at $54.93.

Worldwide benchmark Brent crude futures fell 0.3 percent to $58.39 a barrel by 0310 GMT. The euro strengthened to $1.1219 from $1.1207.

The dollar fell to 105.27 Japanese yen from 105.57 yen on Friday.

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