Friday, 14 December, 2018

Dow dives almost 800 points on fears of economic slowdown

US markets sink on worries over slowing growth, trade truce outcome Dow plunges nearly 800 pts: Aus share to drop at open
Laurie Berry | 07 December, 2018, 14:11

The Dow closed down 799.36 points or, 3.10 percent, at 25,027.07, while the S&P 500 fell 3.24 percent and the Nasdaq Composite slid 3.8 percent, as President Donald Trump stoked trade war fears and a flattening yield curve prompted worries of a recession.

The S&P 500 is up 26.45 points, or 1 per cent. -China trade talks. The inversion of a portion of the Treasury yield curve for the first time since 2007 reinforced the impression that markets are approaching the end of the current cycle.

Technology companies, banks and industrial stocks accounted for much of the sell-off as traders moved assets into the relative safety of US government bonds, driving yields sharply lower.

For Capital Economics, "we doubt that the ceasefire agreed between Presidents Trump and Xi in Buenos Aires will mark a real turning point in the trade war".

The president tweeted optimistically about the chances for a deal with China, writing "President Xi and I want this deal to happen, and it probably will". USA futures also augured a downbeat start for Wall Street after markets were closed Wednesday to mourn the death of former President George H.W. Bush.

This is a much different characterisation of the China talks than just three days ago when Trump had dinner with China's president at a meeting of the Group of 20. "Financial markets are increasingly showing signs of fear of a recession".

A note from S&P Global Ratings predicted that United States growth would slow from 2.9 per cent in 2018 to 2.3 per cent in 2019 and 1.8 per cent in 2020, adding that the United States was nearing the "latter" stages of a multi-year growth cycle.

George W. Bush passes candy to Michelle Obama at his father’s funeral
Saudi Arabia's foreign minister Adel Al-Jubeir has expressed condolence over the demise of former USA president George H.W. Throughout the service, the former presidents looked at times mournful, while managing to find moments of levity as well.

FED WATCH: Markets got jolt from remarks by the president of the Fed's NY regional bank.

While the more closely watched part of the Treasury yield curve - the gap between two-year and 10-year yields - remains upwardly sloped, it flattened to just 15 basis points Monday.

The comments came after those from Fed chair Jerome Powell last week, which lifted stocks as they were interpreted as suggesting a less aggressive path of rate hikes.

Large banks were among the big losers, with JPMorgan Chase shedding 4.4 percent, Bank of American losing 5.7 percent and Citigroup 5.6 percent. The slide in bond yields, which affect interest rates on mortgages and other consumer loans, weighed on bank stocks.

Ahead of the upcoming OPEC meeting on Thursday in Vienna, Bjarne Schieldrop, chief commodities analyst at SEB, the leading Nordic corporate bank, said he believed continued cooperation would help oil prices stay above $60 a barrel. Toll's shares slid 1.6 percent to $32.99.

Brent crude, the worldwide standard, added 0.6 percent to close at $62.08 per barrel in London. The euro was little changed at $1.1342.

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