Stocks Fall Fourth Day, Yen Gains on Trade Angst: Markets Wrap

(Bloomberg) -- U.S. stocks capped a fourth day of losses, though finished off the lows of the day, while the yen strengthened versus the dollar as investors assessed the likelihood of fresh tariffs just hours before they are due to take effect. The yuan fell to its weakest since January.

The S&P 500 is on pace for its worst week of the year after another trade-fomented decline. The bellwether had slumped as much as 1.5% before Trump said he received a “beautiful letter” from Chinese President Xi Jinping and that the two leaders would probably speak by phone. Talks began in Washington at 5 p.m.

The Stoxx Europe 600 fell the most this year, while the MSCI Asia Pacific gauge dropped the most in six weeks. The gap between 3-month and 10-year Treasury rates briefly turned negative, traditionally a recession warning.

“When you think about just how much uncertainty there is on that front, the dip we’re seeing is really not that substantial,” said Mike Loewengart, vice president of investment strategy at E*TRADE Financial. “To be sure things could get far worse, but if you look at the remarkable trajectory of the market so far this year, this week’s declines are a minor speed bump at this point.”

Trade discussions will resume hours after concerns flared again about the strength of the Chinese economy -- the country’s credit growth slowed in April to a level below all 27 estimates in a Bloomberg survey. Beijing has warned it will retaliate should the U.S. hike tariffs as advertised on Friday.

“If tariffs are increased at 12:01 a.m. Friday, the decline in risk assets is likely to intensify,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI.

Meanwhile, simmering geopolitical tension elsewhere -- from North Korea testing missiles again to renewed stress between America and Iran -- added to the gloomy mood. Crude oil edged lower and emerging-markets stocks tumbled. Developing-nation currencies weakened. The lira trimmed some losses after Turkey’s central bank unexpectedly raised borrowing costs for the country’s lenders.

Here are some notable events coming up:

• The U.S. releases the April CPI report Friday.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.3 as of 4:03 p.m. New York time, while the Nasdaq Composite Index dropped 0.4% and the Dow Jones Industrial Average slumped 0.5%.
• The Stoxx Europe 600 fell 1.7%.
• The MSCI Emerging Market Index dropped 2.1%.
• The MSCI Asia Pacific Index slumped 1.4%.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro rose 0.2% to $1.1219 while the yen strengthened 0.4% to 109.72 per dollar.
• The British pound was little changed at $1.3015.
• The MSCI Emerging Markets Currency Index eased 0.6%.

Bonds

• The yield on 10-year Treasuries fell 3 basis points to 2.45%.
• Germany’s 10-year yield fell less than 1 basis point to negative 0.05%.

Commodities

• West Texas Intermediate fell 0.9% to $61.57 a barrel.
• Gold rose. 0.2% to $1,284 an ounce.
• The Bloomberg Commodity Index fell 0.6%, the third decline in four days.

--With assistance from Andrew Dunn and Luke Kawa.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

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

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