Stocks Decline on Trade Woes; Treasuries Rise: Markets Wrap

(Bloomberg) --

Stocks fell as trade talks between the U.S. and China struck another stumbling block, while Treasuries rose and the dollar declined after a gauge of American manufacturing signaled contraction for the first time in three years.

The S&P 500 dropped for the first time in four sessions as Chinese and American officials struggled to agree on a schedule for negotiations after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend, according to a Bloomberg report. Technology shares weighed on benchmarks after Huawei Technologies accused the U.S. government of harassing workers and attacking its internal network. Boeing led losses on the Down Jones Industrial Average.

The 10-year Treasury yield slid and the dollar dropped against peers after the Institute for Supply Management’s purchasing managers index fell to 49.1 in August, which when below 50 indicates manufacturing contracted. The reading joins a slew of weak numbers produced by factory gauges across the globe, and boosted bets on deep rate cuts by the Federal Reserve this year.

“People felt better last week because there was better verbal communication, comments going on out of the United States and abroad. But actions speak louder than words and neither side backed off lifting their tariffs on this prescribed date,” Jim Paulsen, chief investment strategist at the Leuthold Group, said in an interview. “There’s a difference between where we were Friday and where we are now in terms of the tariffs actually going into effect. That and a weak manufacturing number out of China and now a weak manufacturing number in the United States just reinforces that trade is having a negative impact.”

September has begun with a rocky start for risk assets as traders remain sensitive to the twists and turns of the Sino-U.S. trade war, and the first big economic data of the month reminded investors the global economy remains on shaky ground partly as a result. With mistrust on both sides, officials from the world’s two largest economies are struggling to agree on basic terms of re-engagement.

Elsewhere, the pound turned higher after U.K. Prime Minister Boris Johnson lost his majority in the House of Commons amid the ongoing Brexit brinkmanship. West Texas-grade crude oil slipped below $54 a barrel amid concerns an economic slowdown from the trade war may dent demand. The eye of Hurricane Dorian has started to move northwest off the U.S. coast, while the storm continues to pound Grand Bahama Island.

Here are some key events coming up:

• Bank of England Governor Mark Carney speaks before Treasury Committee on Wednesday alongside colleagues Andy Haldane, Jonathan Haskel and Gertjan Vlieghe, on the bank’s August Inflation Report; he’ll then appear alone to discuss the U.K.’s economic relationship with the EU.
• Fed speakers this week include New York Fed’s John Williams on Wednesday and Fed chair Jerome Powell on Friday.
• The U.S. jobs report on Friday is projected to show the widely watched nonfarm payrolls rose by 158,000 in August, versus 164,000 the month prior. Estimates are for unemployment to be steady at 3.7% and the average hourly earnings rate of increase to slow to 3.0%.

These are the main moves in markets:

Stocks

• The S&P 500 Index sank 0.7% as of 4 p.m. New York time.
• The Dow Jones Industrial Average fell 1.1%.
• The Stoxx Europe 600 Index slipped 0.2%.
• The MSCI Asia Pacific Index fell 0.3%.

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.
• The euro was little changed at $1.0965.
• The British pound rose 0.2% to $1.2095, after briefly falling to the lowest since 2017.
• The Japanese yen gained 0.2% to 106.04 per dollar.

Bonds

• The yield on 10-year Treasuries fell two basis points to 1.47%.
• The yield on two-year Treasuries dropped four basis points to 1.46%.
• Britain’s 10-year yield decreased one basis point to 0.406%.

Commodities

• West Texas Intermediate crude fell 1.8% to $54.11 a barrel.
• Gold rose 1.5% to $1,552.50 an ounce.
• Copper decreased 0.9% to $2.52 a pound.

--With assistance from Todd White.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@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, Laura Curtis

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