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Stocks Sink, Bonds Gain as U.S.-China Feud Deepens: Markets Wrap

  • President Trump vows to respond to new China tariffs Friday
  •  Powell says economy in favorable place, faces significant risk

WT24 Desk

U.S. stocks slumped and Treasuries rallied after President Donald Trump said he’ll respond to new Chinese tariffs and blasted Federal Reserve Chairman Jerome Powell. The dollar fell, Bloomberg reports.

Equities started the day lower after China threatened to impose additional tariffs on $75 billion of American goods. The S&P 500 Index briefly rebounded as Powell’s remarks bolstered speculation the central bank will cut rates next month. Gains fizzled out quickly after Trump’s tweet on trade, with technology companies leading a sell-off in stocks. Ten-year yields halted a two-day advance. The greenback dropped as the U.S. president said that “we have a very strong dollar and a very weak Fed, fueling chatter about a possible U.S. move to weaken the currency. Oil sank and gold surged.

The escalation in the trade feud rekindled concerns about the outlook for global growth that’s already looking shaky. The announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole. Trump tweeted that the Fed chairman could be a greater “enemy” of the U.S. than Chinese President Xi Jinping. “As usual, the Fed did NOTHING!,” he wrote.

“Trade trumps Jackson Hole,” said John Augustine, chief investment officer at Huntington Private Bank. “Fed Chair Powell was fairly dovish today and markets were reacting to that positively, but when the trade tweet came out, that obviously changed market dynamics.”

Here are the main moves in markets:

Stocks

  • The S&P 500 lost 1.7% to 2,872.81 as of 12:34 p.m. New York time.
  • The Stoxx Europe 600 Index declined 0.8%.
  • The MSCI Asia Pacific Index advanced 0.5%.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.3%.
  • The euro climbed 0.5% to $1.1135.
  • The Japanese yen appreciated 0.9% to 105.48 per dollar.

Bonds

  • The yield on 10-year Treasuries slid eight basis points to 1.53%.
  • Germany’s 10-year yield fell three basis points to -0.68%.
  • Britain’s 10-year yield declined four basis points to 0.481%.

Commodities

  • The Bloomberg Commodity Index declined 0.8%.
  • West Texas Intermediate crude sank 3.1% to $53.63 a barrel.
  • Gold surged 1.7% to $1,534.10 an ounce.

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