BNN Bloomberg's closing bell update: May 6, 2019
U.S. stocks marched almost all the way back from a selloff fomented by Donald Trump’s threat to escalate the trade war, with investors taking solace from news that China will still attend talks this week. Oil rallied.
The S&P 500 index climbed through much of the afternoon session after tumbling by the most since March at the opening of trading, signaling a potentially volatile week on Wall Street after Trump tweeted a plan to hike tariffs this coming Friday. The S&P, Dow and Nasdaq all still finished lower. The recovery from the lows accelerated after CNBC reported that a Chinese trade delegation will still come this week to the U.S. for talks.
“A trade war isn’t new to us.,” Robert Baird & Co.’s Michael Antonelli said. “We’ve had this giant threat of a trade war circling us for a better part of a year now.”
Commodities were roiled. Cotton and corn futures slumped, while soybean contracts tumbled. Oil recovered from early declines after Trump also dispatched warships to the Middle East in a warning to Iran, helping to lift many energy-related shares. Health care stocks were the only sector of the S&P to close higher.
European government bonds and the euro held steady as economic activity in the euro area showed signs of stabilization. Equities in the region slid, tracking a sell-off across much of Asia. Shanghai’s benchmark index tumbled 5.6 per cent, even after Chinese state-backed funds were said to have been active in an effort to limit the damage.
Seeking to ramp up pressure on China for more concessions, Trump threatened in two tweets to more than double tariffs on $200 billion of Chinese goods and impose a fresh round of duties on top of that. Talks to resolve the year-long trade standoff appeared to be on life-support Monday, with Beijing struggling to fully respond. China’s foreign ministry said that officials were still planning to travel to the U.S. for the next round of negotiations, but it was unable to confirm when amid signs that a delay is now being considered.
“Escalation like this means we are certainly further away from the end of this negotiation process than we thought,” said Arthur Hogan, chief market strategist at National Securities Corp. “The three things that have been driving this market higher this year have been the pivot by the Fed, better than feared earnings, and the belief that we would get a trade deal done sooner rather than later.”
Elsewhere, Turkey’s lira weakened past six per U.S. dollar, touching its lowest level in almost seven months as a possible repeat of the March Istanbul mayor’s election hung over the market and added more pressure to emerging-market currencies.
Here are some notable events coming up:Chinese Vice Premier Liu He is scheduled to return to Washington for trade talks on Wednesday, though the schedule may now be in flux. The Reserve Bank of Australia meets to set interest rates Tuesday, while New Zealand central bank does the same the following day. China releases trade data Wednesday, and the U.S. does so on Thursday. South Africa holds national elections Wednesday. China reports on inflation Thursday. The U.S. releases the April CPI report Friday.
These are the main moves in markets:
STOCKSThe S&P 500 Index fell 0.5 per cent as of 4:05 p.m. ET, while the Nasdaq Composite Index dropped 0.5 per cent and the Dow Jones Industrial Average slumped 0.3 per cent. The Stoxx Europe 600 fell 0.9 per cent. The MSCI Emerging Market Index dropped 1.8 per cent. The MSCI Asia Pacific Index slumped 1.1 per cent.
CURRENCIESThe Bloomberg Dollar Spot Index gained 0.2 per cent. The euro was little changed at US$1.1206 while the yen strengthened 0.2 per cent to 110.88 per U.S. dollar. The British pound weakened 0.5 per cent to US$1.3102. The MSCI Emerging Markets Currency Index eased 0.2 per cent.
BONDSThe yield on 10-year Treasuries fell three basis points to 2.50 per cent. Germany’s 10-year yield fell two basis points to 0.01 per cent.
West Texas Intermediate rose 1.3 per cent to US$62.75 a barrel. Gold rose 0.1 per cent to US$1,280 an ounce. The Bloomberg Commodity Index fell 0.5 per cent.