Stocks Slide, Bonds Climb as Trade Tensions Rise: Markets Wrap

(Bloomberg) -- The Trump administration’s tariffs on imports from key allies sent U.S. and European stocks into a tailspin and stoked demand for the safety of Treasuries.

The S&P 500 fell for the fourth time in five days, paring a monthly advance as the president’s escalation of trade tensions with Canada, Mexico and the European Union hammered American industrial and financial shares. Deutsche Bank AG fell to a record low after reports that U.S. regulators added it to a group of troubled lenders they monitor. The 10-year Treasury yield fell to 2.84 percent, while Mexico’s peso and Canada’s dollar retreated.

The Trump administration’s unilateral action upended the global trade order and was met with retaliatory actions that could imperil economic growth. The ratcheting up of tension overshadowed reports that Italy is close to forming a government that is more EU-friendly than investors had feared. Investors are also bracing for Friday’s jobs report.

“The hard thing about protectionism, the hard thing about tariffs and quotas, is that you can almost think of it as it’s a slow moving disease, but it’s deadly,” Kristina Hooper, Invesco’s chief global market strategist, said in an interview at Bloomberg’s New York headquarters. “When I look at protectionism, I don’t believe the market truly can price it in at this point because there’s still so many potential iterations. But right now it’s certainly moving further to the extremes when it comes to protectionism and that can be very problematic.”

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some key events to watch this week:

• The U.S. employment report for May is due Friday. It’s the last before the June Fed meeting.
• Automakers report May U.S. sales the same day.
• Also Friday: some onshore Chinese stocks join MSCI Inc.’s global indexes.
• On Saturday U.S. Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp. and trade.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.7 percent to 2,705 as of 4 p.m. New York time.
• The Dow Jones Industrial Average dropped 1 percent to 24,416.
• The Nasdaq Composite Index declined 0.3 percent.
• The Stoxx Europe 600 Index dropped 0.6 percent.
• The MSCI Emerging Market Index increased 0.7 percent, the largest climb in three weeks.

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 percent.
• The euro gained 0.2 percent to $1.1687.
• The British pound was little changed at $1.3292.
• The Japanese yen rose 0.1 percent to 108.77 per dollar.

Bonds

• The yield on 10-year Treasuries fell one basis points to 2.84 percent.
• Germany’s 10-year yield dipped three basis points to 0.34 percent.
• Britain’s 10-year yield dropped three basis points to 1.230 percent.

Commodities

• West Texas Intermediate crude decreased 1.7 percent to $67.04 a barrel.
• Gold fell 0.1 percent at $1,299.66 an ounce.

--With assistance from Sarah Ponczek and Samuel Potter.

To contact the reporter on this story: Randall Jensen in New York at rjensen18@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Yakob Peterseil

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