➤ China slams U.S. 10% tariff threats, hints at retaliation.
➤ U.K. retail sales unexpectedly rise in July.
➤ U.S. stock futures pared earlier gains; global stocks mixed.
➤ Yields on 30-year U.S. bonds drop below 2% for 1st time.
U.S. stock futures reversed earlier gains and European bourses dropped for a second day after China said it could retaliate against the latest round of tariffs from the U.S. amid investor concern that a recession is looming.
China's Ministry of Finance said Aug. 15 that the Trump administration's plan to impose 10% tariffs on Chinese goods hinders efforts to resolve the ongoing trade rift and could prompt Beijing to retaliate. The U.S. and China are due to meet in Washington for another round of trade talks in September.
Yesterday, the Dow Jones Industrial Average tumbled 3.1%, its biggest decline in a year, while the S&P 500 fell 2.9% and the Nasdaq Composite lost 3%. Markets were spooked by inverted yield curves in the U.S. and the U.K., which can signal a recession, as well as poor economic data from China and Germany.
"Markets went right back into full risk-off mode Wednesday and that's where they remain," said Win Thin, head of global currency strategy at Brown Brothers Harriman. "Weak data out of China and Germany added to the global gloominess, with equity and bond markets behaving as one would expect. Gold is bid, not as an inflation hedge but as just another haven asset."
S&P 500 index futures fell 0.6% as of about 7 a.m. ET, while those on the Nasdaq slid 1.1% as investors awaited a slew of U.S. macroeconomic data including industrial production and retail sales.
In Europe, the Euro Stoxx 50 dropped 1.4%, with FTSE 100 down 1.7%, Germany's DAX 1.8% lower and France's CAC 40 losing 1.4%.
Trading in Asia was mixed, with the Shanghai SE Composite and Hong Kong's Hang Seng up 0.3% and 0.8%, respectively, while Japan's Nikkei 225 lost 1.2%.
Yields on 10-year Treasurys fell 1 basis point to 1.568% and remained below the yield on 2-year notes. Yields on 30-year U.S. bonds shed 3 basis points to reach just below 2% for the first time.
U.S. 10-year Treasurys were 6 basis points lower at 1.52%, an almost three-year low. German bunds yields slid 3 basis points to negative 0.69%, a record. Similar-maturity gilt yields shed 3 basis points to a record-low 0.42%. Italian 10-year note yields fell 4 basis points to 1.46%, approaching an almost three-year low.
The Dollar Index, which measures the U.S. currency against a basket of developed-market peers, was 0.1% lower at 97.8450 after gaining 0.6% in the past two trading sessions.
The euro rose 0.1% to $1.1155, while sterling gained 0.4% to $1.2103 after a report showed that U.K. retail sales unexpectedly rose in July.
The Australian dollar gained 0.4% against its U.S. counterpart after a better-than-expected employment report fueled hopes that the Reserve Bank of Australia would not rush to ease interest rates further.
The Argentine peso closed 7.6% weaker yesterday in Buenos Aries even after President Mauricio Macri announced relief measures in a bid to stem the economic turmoil from his loss in the primary elections.
The Norwegian krone weakened 0.1% to 8.9955 per dollar as the Norges Bank left interest rates unchanged while warning that the global risk outlook entailed greater uncertainty about its policy path.
Brent crude oil declined 2.4% to $58.07 per barrel on the ICE Futures Exchange, following a 3% drop yesterday and is approaching the lowest level since early January. Gold spot added $0.2 to $1,519.87 per ounce, the highest level since April 2013.
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The day ahead:
8:30 a.m. ET — U.S. retail sales (Econoday consensus: 0.3% month over month)
8:30 a.m. ET — U.S. jobless claims (Econoday consensus: 208,000)
8:30 a.m. ET — U.S. Empire State manufacturing survey (Econoday consensus: 2.5)
8:30 a.m. ET — U.S. productivity and costs
9:15 a.m. ET — U.S. industrial production (Econoday consensus: 0.1% month over month)
10 a.m. ET — U.S. business inventories (Econoday consensus: 0.1% month over month)
10 a.m. ET — U.S. housing market index (Econoday consensus: 66)
10:30 a.m. ET — Energy Information Administration natural gas report
4 p.m. ET — U.S. Treasury international capital
4:30 p.m. — U.S. Fed Balance Sheet
4:30 p.m. — U.S. money supply