US and European stocks fell on Tuesday as US-China trade tension and intensified Brexit uncertainty weighed on global markets.
The S&P 500 was down 1.4 per cent in morning trade, giving the benchmark a shot at notching up its fourth move of 1 per cent or more in either direction — or its third 1-plus per cent drop — in the space of six sessions.
The Nasdaq Composite shed 1.4 per cent and the Dow Jones Industrial Average was down 1.2 per cent.
The sell-off came against the backdrop of declining borrowing rates as investors, unnerved by another flare-up in US-China trade tension, sought the relative safety of government debt.
The yield on the benchmark 10-year US Treasury was down 3.9 basis points at 1.5136 per cent and around a one-month low, while that on the policy-sensitive two-year was off 1.4275 per cent.
US-China trade talks are scheduled to resume on Thursday, with analysts remaining dubious on the likelihood of a game-changing outcome. “We see some possibility of a truce, but a comprehensive trade deal remains unlikely,” BlackRock said in a note.
The Trump administration has said it will restrict companies from exporting American-made goods to 28 more Chinese groups, in an announcement that came three days before the visit of Liu He, Beijing’s chief trade negotiator with the US, to Washington.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expects “only modest progress” in the talks.
“Given the recent deterioration in economic data, we retain a tactical underweight position in equities while awaiting the result,” he said.
Data released before the Wall Street open showed US core producer prices fell in September by the most in more than four years, giving the Federal Reserve more flexibility on monetary policy at its late October meeting.
In Europe, the broad Stoxx 600 benchmark and Germany’s Dax were each down 0.9 per cent, while France’s Cac 40 shed 0.9 per cent. The UK’s FTSE 100 was down a relatively milder 0.4 per cent.
Sterling weakened 0.6 per cent against the euro, hovering just off the threshold of 90p per €1, or €1.1143 per £1, as hopes of a Brexit deal at next week’s EU summit fizzled. Boris Johnson’s allies admitted on Tuesday that any hopes the UK will strike a deal with Brussels at the meeting were effectively dead.
Asian markets rallied. China’s CSI 300 was up 0.6 per cent on its return following a week’s holiday. In Hong Kong, the Hang Seng index was also 0.3 per cent higher, rising from a five-week low despite four days of often violent protests after the city’s chief executive invoked a colonial era emergency law to ban demonstrators from wearing face masks.
South Korea’s Kospi rose 1.2 per cent, and technology shares outperformed across Asia, after Samsung’s third-quarter results beat forecasts.
The Turkish lira remained under pressure after US President Donald Trump threatened to “obliterate” Turkey’s economy if the country launched any operation in Syria that he considered to be “off limits”. The currency was hovering at its weakest in more than a month at TL5.81 against the US dollar.