Trump's Trade War Is Written All Over Latest Stock Rout
No Mistaking Cause of Stock Rout as China-Linked Shares Pounded
(Bloomberg) -- The trade war’s fingerprints are all over the swoon in U.S. equities.
A basket of U.S. stocks with outsized exposure to China is trailing the S&P 500 by more than 1 percentage point Tuesday, the biggest underperformance in two months. The White House ratcheted up the trade war, with a move to blacklist Chinese technology behemoths and continued interest on restricting portfolio flows, as well as the potential for retaliation by the world’s second-largest economy.
The basket, compiled by Goldman Sachs Group Inc., is down 2.7%, while the broader equity benchmark has lost 1.3% as of 11:51 a.m. in New York. It’s the biggest gap since Aug. 1, when U.S. President Donald Trump announced his intention to levy tariffs on the remaining $300 billion in Chinese imported goods.
Goldman’s grouping has a maximum weighting of one-third toward the technology sector. The median stock generates over one-fifth of its revenue from China.
Highlighting the market’s sensitivity to trade, Chinese-centric stocks briefly snapped back more sharply than the benchmark gauge following a report from China’s Global Times that the delegation going to Washington, D.C. for trade negotiations is “one of the largest and broadest teams.”
Trade was heralded as a primary driver of market action on many occasions in September. But the relatively meager extent to which Chinese-linked U.S. stocks lagged on the sessions when headlines hit suggests trade was merely an excuse for widespread risk aversion as the S&P 500 failed to set fresh record highs.
This time it looks to be for real.
To contact the reporter on this story: Luke Kawa in New York at lkawa@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka
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