Dow Jones falls almost 800 points amid trade war, recession fears

Marco Green
December 5, 2018

-China trade fight. CBS News business analyst Jill Schlesinger reports.

The NZX-50 index ended around 1 per cent down at 8781 in contrast to the USA stock market, which dropped by 3.10 per cent on the Dow Jones index on the back renewed fears of a trade war and bearish signals coming from the U.S. government bond market. The yield on five-year Treasury bonds has fallen below the yield on a three-year bond for two days running, meaning that U.S. investors are being paid more to hold government debt that matures in three years than in five years. This has not occurred since 2007.

The Dow sank as much as three percent on Tuesday afternoon, December 4, 2018, as losses on Wall Street accelerated amid worries about the US economic outlook and skepticism over the US-China trade truce. Investors' confidence in that truce faltered Tuesday, contributing to renewed fears that the disagreement between the two economic powerhouses could slow the global economy.

The drop came amid a signal from government bond rates seen as an early-warning indicator of a US recession, as well as the confusing status of the touted US-China agreement to halt their trade war.

Hong Kong's Hang Seng index fell 1.6 percent to 26,840.74 points and the Shanghai Composite Index lost 0.7 percent to 2,647.55.

Automakers were among the big winners on Wall Street Monday. The Nasdaq composite lost 3.8 percent to 7,158.43.

"Maybe we're not going to get as dovish a Fed as some think", said Joseph LaVorgna, chief economist, Americas at Natixis in NY. JPMorgan Chase sank 4.5 percent.

Big losses for Boeing and Caterpillar, major exporters which would stand to lose much if trade tensions persist, weighed on the Dow.

The jitters helped drive demand for government bonds today, pushing prices higher. The slide in bond yields, which affect interest rates on mortgages and other consumer loans, weighed on bank stocks.

The KBW Bank index slid 4.90% with Bank of America Corp and Citigroup Inc dropping more than 5 % each. Toll's shares rose 0.4 percent to $33.67, recovering from a morning sell-off.

Apple lost 4.4 percent to $176.69 after the consumer electronics giant was downgraded by HSBC analysts, citing the possibility that iPhone volume and value growth may moderate due to a saturated mobile phone market.

United Parcel Service slumped 7.4 percent to $106.77 and FedEx dropped 6.3 percent to $215.52.

Outside the benchmark index, Cavalier Corp dropped 11 per cent to 56 cents in light trading after the company said restructuring underpinned an increased forecast for first-half earnings, and noting weaker sales in softer market conditions.

Oil prices headed higher ahead of an OPEC meeting on Thursday, where members are expected to agree to cut output in 2019. Benchmark U.S. crude rose 0.6 per cent to $53.27 per barrel in NY. Brent crude, the global standard, added 0.9 per cent to $62.22 per barrel in London.

CURRENCY: The dollar gained to 112.95 yen from Wednesday's 112.78 yen. The euro was little changed at $1.1342. The British pound fell to $1.2716 from $1.2728. Germany's DAX lost 1.1 percent, while France's CAC 40 dropped 0.8 percent. The S&P ASX/200 in Australia gave up 1 per cent. The Nasdaq fell 197 points, or 2.7 percent, to 7,244.

The Dow Jones Industrial Average fell 211 points, or 0.8 percent, to 25,611.

Other reports by Click Lancashire

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