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Stocks Fall on Heightened Trade Worry; Dollar Dips: Markets Wrap

Bloomberg logoBloomberg 10/12/2018 Adam Haigh
S&P 500 futures, 10-year yields fall on renewed U.S.-China tensions © Bloomberg S&P 500 futures, 10-year yields fall on renewed U.S.-China tensions

(Bloomberg) -- U.S. stock futures declined with equities in Asia amid a potential escalation of tensions between Washington and Beijing, and after signs China’s economy remains under pressure. Treasury yields extended last week’s retreat and the dollar fell.

Shares dropped from Sydney to Hong Kong and futures indicated lower starts for sessions in Europe and the U.S. on Monday. Yields on 10-year Treasury slid to 2.83 percent, the lowest in four months. Dampening the mood at the start of the week was news China’s vice foreign minister has summoned the U.S. ambassador Terry Branstad in protest over the arrest of Huawei Technologies Co.’s chief financial officer and weak data on China’s slowing economy.

Sentiment in financial markets has been fragile in recent weeks as traders gauge whether the Fed will soon pause hiking as trade war fears linger. It’s unclear how much the summons of the U.S. ambassador, China’s most public display of anger over the arrest, will mark a heightening of tensions over the arrest and Huawei more generally.

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“Until we get a resolution there won’t be that impasse broken to jump back into the markets,” Kyle Rodda, a Melbourne-based market analyst at IG Group Holdings Plc, told Bloomberg TV.

Signs that demand remains sluggish in the world’s second-largest economy came hot off the heels of data showing the U.S. labor market moderated in November. That’s emboldening those who are betting on a slower pace of Federal Reserve interest-rate increases next year. The Fed is now in a blackout period with no scheduled public speeches ahead of its Dec. 18-19 policy meeting.

“I don’t have much reason for optimism” on the trade issue, Hans Goetti, founder of HG Research, told Bloomberg TV from Singapore. “The mantra now has to be, instead of buy the dip, you will have to sell into strength -- that’s the message here.”

Also on investors’ minds is Tuesday’s crucial House of Commons vote on Brexit. U.K. Prime Minister Theresa May faces stiff odds, but Brexit Minister Kwasi Kwarteng told Sky News the prime minister could still get her deal through. And there’s been another change of personnel in the White House, as Chief of Staff John Kelly steps down, removing a key force for West Wing discipline from President Donald Trump’s inner circle.

Elsewhere, India’s rupee fell with stocks and bonds as exit polls showed Prime Minister Narendra Modi’s party is set for tight electoral contests in key states before general elections next year. Oil steadied after Friday’s rally triggered by OPEC and its allies agreeing on production cuts.

Coming Up

The U.K. House of Commons will vote on the EU divorce deal on Tuesday, with Prime Minister Theresa May confronted by opponents within her own Conservative Party. The European Central Bank is set to cap asset purchases at its final policy meeting of 2018 on Thursday. China industrial production, retail sales data for November is due Friday.

These are the main moves in markets:

Stocks

Japan’s Topix index fell 1.9 percent at the 3 p.m. close in Tokyo. Australia’s S&P/ASX 200 Index lost 2.3 percent. Hong Kong’s Hang Seng Index dropped 1.4 percent. The Shanghai Composite Index fell 0.8 percent. Futures on the S&P 500 Index were down 0.7 percent. The S&P 500 sank 2.3 percent Friday. Futures on the Euro Stoxx 50 lost 1.2 percent and the FTSE 100 Index futures dropped 0.8 percent.

Currencies

The yen gained 0.2 percent to 112.47 per dollar. The offshore yuan slid 0.3 percent to 6.9019 per dollar. The Bloomberg Dollar Spot Index fell 0.1 percent. The euro bought $1.1437, up 0.5 percent. The pound rose 0.2 percent to $1.2753.

Bonds

The yield on benchmark 10-year Treasuries dropped one basis point to 2.83 percent. Australia’s 10-year bond yield was steady around 2.44 percent.

Commodities

West Texas Intermediate crude slid 0.2 percent to $52.51 a barrel. Gold was little changed at $1,249.04 an ounce.

--With assistance from Haidi Lun, Shery Ahn and Cormac Mullen.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc, Ravil Shirodkar

©2018 Bloomberg L.P.

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