Bloomberg
Published Aug 05, 2019 02:11PM ET
Updated Aug 05, 2019 02:26PM ET
U.S. Stocks Head for Worst Rout of 2019 on Trade: Markets Live
(Bloomberg) -- Financial markets buckled after China escalated the trade war with the U.S., sending American stocks careening toward the biggest drop of the year and sparking a rally in global bonds. Gold surged with the yen.
The S&P 500 Index extended losses from a record to almost 6%, the fastest decline from a peak since January 2018, while the Dow Jones Industrial Average plunged more than 700 points. The broader measure was down for six straight days, mired in the longest slide since October. The Cboe Volatility Index, the market’s “fear gauge,” surged 31%. The 10-year Treasury yield was close to completely erasing the jump that followed President Donald Trump’s election. China’s yuan sank beyond 7 per dollar, a move that suggests the level is no longer a line in the sand for policy makers in Beijing. Oil slid.
Investors are starting to grasp the potential for a protracted conflict between the world’s two largest economies, with a Treasury-market recession indicator hitting the highest alert since 2007. As demand for haven assets spiked, gold made a run toward $1,500 an ounce and the Japanese yen extended its rally. Major cryptocurrencies, increasingly seen as a refuge during distressed times, climbed as Bitcoin approached $12,000.
“The trade war is now intensifying and it’s possible that a currency war will start as well,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance. “Neither is good for the global economy and both will hurt equity markets.”
President Trump said the yuan slide is “called ‘currency manipulation”’ and indicated he’d like the Federal Reserve to act to counter the Chinese action. Swaps show bets the U.S. central bank will ease by 100 basis points by December 2020, a quarter point more than what was priced in after last week’s cut.
The trade war has been a consistent catalyst for market volatility and hopes of a resolution are now being sent even further out in the horizon, according to Mike Loewengart, vice president of investment strategy at E*Trade Financial Corp. While that could continue to challenge portfolios, investors should not make the mistake of trying to time the markets amid the sell-off, he said.
“This too shall eventually pass, and bouts of volatility in recent months have shown this can happen quickly,” said Loewengart.
These are some key events to watch out for this week:
Stocks
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.