Stocks Fall Most Since August on Weak Factory Data: Markets Wrap

(Bloomberg) -- Stocks slid and Treasuries rose after a gauge of U.S. manufacturing posted the weakest reading since the end of the last recession, fueling fears of an impending global slowdown and boosting haven assets.

The S&P 500 fell the most in five weeks and pushed through a key support level after the Institute for Supply Management’s factory index slipped to the lowest since June 2009. Banks led the decline as rates moved lower, followed by industrial companies. The 10-year Treasury yield tumbled to 1.64% and the dollar weakened against major peers. Gold and the Japanese yen advanced.

“We are clearly seeing a very weak backdrop for manufacturing. The concern is the contagion effect into the services economy, which is the driving force of the U.S. economy,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “We cannot take this lightly and we think the Fed shouldn’t take it lightly either.”

The weak factory gauge, which came on the heels of similarly disappointing numbers out of Europe on Tuesday, renewed concerns about a global economic slump amid the U.S.-China trade war and sparked another round of speculation about how much the Federal Reserve will cut interest rates this year. Investors may get some signals from the slew of Fed speakers this week, which include Chairman Jerome Powell on Friday, when the latest jobs report will also be released.

Elsewhere, European shares fell the most in almost seven weeks following data that showed the region’s manufacturing sector slumped last month and inflation slowed. The euro advanced after the European Union was said to be ready to consider a time limit on the Irish Brexit backstop. Oil fell to the lowest in almost a month amid a grim outlook for global energy demand.

Asian markets were subdued as Hong Kong and China were closed for holidays, while Australia’s dollar slid after the central bank cut its benchmark interest rate to a record low.

Here are some key events coming up this week:

• There’s a slew of U.S. numbers this week, including the ADP employment report on Wednesday and the monthly jobs report on Friday.
• Federal Reserve Chairman Jerome Powell set to speak Friday.
• The Reserve Bank of India sets policy on Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 Index fell 1.2% as of 4 p.m. New York time.
• The Nasdaq Composite Index dropped 1.1%, while the Dow Jones Industrial Average lost 1.3%.
• The Stoxx Europe 600 Index sank 1.3%.
• The U.K.’s FTSE 100 Index fell 0.7%.
• The MSCI Asia Pacific Index gained 0.4%.
• The MSCI Emerging Market Index declined 0.3%.

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.
• The euro rose 0.3% to $1.0929.
• The British pound fell 0.2% to $1.2270.
• The Japanese yen rose 0.4% to 107.68 per dollar.

Bonds

• The yield on 10-year Treasuries fell two basis points to 1.64%.
• Germany’s 10-year yield rose one basis point to -0.57%.
• Britain’s 10-year yield fell one basis point to 0.47%.

Commodities

• Gold rose 1% to $1,487.60 an ounce.
• West Texas Intermediate crude fell 0.9% to $53.56 a barrel.

--With assistance from Cormac Mullen, Samuel Potter and Brendan Walsh.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Yakob Peterseil, Dave Liedtka

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