(BBG) Stocks slumped, the dollar gained and commodities slid with emerging-market assets as markets prepared for another escalation in the burgeoning trade war between the U.S. and China.
S&P 500 futures headed for their biggest drop in two weeks, the Stoxx Europe 600 Index ended its best run since March and the MSCI Asia Pacific Index fell after the Trump administration released the biggest list yet of Chinese goods it may hit with tariff increases. The Asian nation vowed to retaliate, and shares in Shanghai led the retreat as the yuan weakened.
The potential escalation spurred advances in the greenback, Treasuries and most European government bonds. Stocks and currencies in emerging markets both declined, while metals bore the brunt of the reaction in commodities. Copper, nickel and zinc all tumbled.
Follow our live blog as China responds to latest tariff threats.
China’s Commerce Ministry described the U.S. move as “totally unacceptable” bullying, and promised to lodge complaints at the World Trade Organization without detailing what its retaliatory steps would be. One pattern seen so far in the escalating battle between the world’s top two economies is that the tensions hit Chinese shares harder than American ones — they are now in a bear market, while the S&P 500 is within about 3 percent of a record high.
“In the short run it’s very difficult to see what’s going to bring an end to this escalation of tit-for-tat,” Richard Turnill, chief investment strategist at BlackRock Inc., told Bloomberg TV in Hong Kong. “It’s those increasing concerns that are going to weigh on market returns and force investors increasingly to look for more resilience in their portfolios.”
A bumper corporate earnings season may still support sentiment, with expectations that strong results can compliment a recent run of positive economic data and overshadow growth concerns stemming from the trade tensions.
Terminal users can read more in Bloomberg’s Markets Live blog.
Elsewhere, oil dropped below $74 a barrel in New York, even as an industry report was said to show shrinking U.S. crude stockpiles.
These are some events to look out for this week:
- Earnings season gets into gear with JPMorgan Chase & Co. and Citigroup Inc. among the largest companies due to give results, as well as India’s Infosys Ltd.
- The most noteworthy U.S. data may be the June inflation report on Thursday, which consensus expects will show both headline and core price growth picking up. There’s another deluge of Treasury debt sales too, with a total $156 billion of notes and bills offered during the week.
- Chinese trade data due at the end of the week will probably show slightly slower export growth, after early indicators pointed to softer overseas demand and weaker export orders, Bloomberg Economics said.
And here are the main market moves:
- Futures on the S&P 500 were down 0.6 percent as of 7:14 a.m. in New York after dropping as much as 1.1 percent earlier.
- The Stoxx Europe 600 Index retreated 1.1 percent.
- The U.K.’s FTSE 100 declined 1.1 percent.
- Japan’s Topix index dropped 0.8 percent.
- Hong Kong’s Hang Seng fell 1.3 percent and the Shanghai Composite lost 1.8 percent.
- South Korea’s Kospi dropped 0.6 percent.
- The Bloomberg Dollar Index was up 0.3 percent
- The Japanese yen slipped to 111.23 per dollar.
- The offshore yuan fell 0.7 percent to 6.6768 per dollar.
- The euro dropped 0.2 percent lower to $1.1716.
- The yield on 10-year Treasuries slipped one basis point to 2.84 percent.
- West Texas Intermediate crude slid 0.7 percent to $73.62 a barrel.
- Gold lost 0.4 percent to $1,250.89 an ounce.