Stocks Pare Losses as Traders Weigh Tariff Threat: Markets Wrap

(Bloomberg) -- Stocks pared losses as investors weighed China’s reaction to U.S. tariff threats, while markets saw high volumes and wild price swings associated with so-called quadruple-witching.

The S&P 500 Index rose from session lows Friday after China, in response to U.S. President Donald Trump’s proposed tariffs on $50 billion of Chinese goods, said it would impose levies on $34 billion of American imports starting next month.

Trade-sensitive sectors including technology hardware and industrials led decliners. Energy firms also got hit by sinking oil prices. Consumer staples and telecoms gained, offsetting some of the drop. Complicating the picture is quadruple-witching, a quarterly event when futures and options contracts on indexes and individual stocks expire.

“This is a quadruple-witching Friday, although you typically see the movement in the market not on the actual witching day, but a couple days before,” Quincy Krosby, the chief market strategist at Prudential Financial Inc., said by phone. “What’s breaking the news is that China has announced tariffs on $34 billion worth of goods, and that’s less than the market actually thought it would be. In other words, the Chinese are not escalating the retaliatory response.”

Treasury yields dipped and Italian debt led a rally in European bonds, which was triggered a day earlier by the ECB ruling out a rise in interest rates until the second half of 2019. The euro gained after Thursday’s slump and the dollar was steady. West Texas crude slipped in the run-up to next week’s OPEC meeting, where a clash over production limits is brewing.

With reports suggesting America is already preparing a second list of targeted goods worth as much as $100 billion, China said it doesn’t want a trade war but would have to counter. Stocks in the country fell earlier, and the Shanghai Composite gauge closed at its lowest level since September 2016.

Emerging markets remain under pressure as worries about an overhaul of Argentina’s central-bank leadership roil the peso. South Korea’s won and Colombia’s peso led declines Friday. Meanwhile, Russia’s ruble pared a decline after the central bank extended a pause in monetary easing and said its shift to looser policy needs to be slower.

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

Here are the main market moves:

Stocks

• The S&P 500 Index decreased 0.1 percent as of 3:07 p.m. New York time.
• The Stoxx Europe 600 Index decreased 1 percent.
• The U.K.’s FTSE 100 Index sank 1.7 percent.
• Germany’s DAX Index decreased 0.7 percent.
• The MSCI Emerging Market Index decreased 1 percent to the lowest in six months.

Currencies

• The Bloomberg Dollar Spot Index gained less than 0.05 percent.
• The euro gained 0.4 percent to $1.1609.
• The British pound gained 0.2 percent to $1.3283.
• The Japanese yen advanced less than 0.05 percent to 110.61 per dollar.

Bonds

• The yield on 10-year Treasuries declined one basis point to 2.92 percent.
• Germany’s 10-year yield declined two basis points to 0.40 percent.
• Britain’s 10-year yield decreased one basis point to 1.328 percent.

Commodities

• West Texas Intermediate crude decreased 2.8 percent to $65.01 a barrel, the biggest drop in over two weeks.
• Gold sank 1.7 percent to $1,279.86 an ounce.
• LME copper sank 2.2 percent to $7,020 per metric ton, the lowest in more than a week.

--With assistance from Cormac Mullen and Joe Easton.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Janine Wolf in New York at jwolf71@bloomberg.net

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

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