U.S. stocks fell on lower than normal volume as investors remained watchful for increasing global trade tensions. The dollar climbed, roiling emerging markets, while oil continued its march toward the highest level since 2014 despite President Donald Trump’s call for Saudi Arabia to increase production in order to reduce prices.
The S&P 500 Index declined, led by weakness in energy and durable goods, which also weighed on the Dow Jones Industrial Average. Investors looked past a strong report from the Institute for Supply Management showing that manufacturing expanded faster than forecast in June. Trading in S&P 500 stocks was about 15 percent below average and activity in Dow shares was about 25 percent below normal, with U.S. desks thinly staffed ahead of the July 4 holiday. Treasuries were little changed.
“You throw in all the tariffs, which tariffs are impossible to model, literally, and that’s why you’re just going to see a back and forth I think for the remainder of the year,” Jason Barsema, president and co-founder of Halo Investing, said by phone. “This trade war, and it is a war, I think we’ve gotten ourselves into a little bit of a pickle.”
Emerging-market stocks retreated, giving up almost half of Friday’s gain, while developing-nation currencies also fell. Mexico’s peso reversed gains following the country’s presidential elections. Earlier, benchmarks in Japan, China and South Korea tumbled. The MSCI Asia Pacific Index sank to its lowest level since in 10 months. The yuan weakened, resuming its sharpest drop since China’s August 2015 devaluation.
Trade-war jitters, political risk in Europe and divergence in monetary policy across the globe remain some of the key issues worrying investors. Britain’s pound declined in yet another big week for Brexit, and the euro came under pressure as tensions deepened in the German coalition. In China, weaker-than-expected manufacturing data for June added to concern that the country’s growth is softening, while in Japan confidence among large manufacturers slipped during the second quarter.
“Trade and tariff tensions continued to weigh on global equities as well as emerging market currencies,” John Stoltzfus, the chief investment strategist at Oppenheimer & Co., wrote in a note to clients Monday. “This is likely to persist particularly as the July 6 deadline looms for the Trump Administration’s planned imposition of tariffs.”
Terminal users can read more in Bloomberg’s Markets Live blog.
These are key events coming up this week:
- The Reserve Bank of Australia has a policy decision Tuesday.
- The U.S. celebrates Independence Day on Wednesday, July 4. Stock and bond markets are closed, along with government offices.
- Federal Reserve releases minutes of its June 12-13 meeting, when FOMC policy makers raised the benchmark rate a quarter point for the second time this year and lifted the median forecast to four total increases in 2018.
- U.S. payrolls are due Friday.
- Also on Friday, the U.S. is scheduled to impose tariffs on $34 billion of Chinese goods. Beijing has said it will slap tariffs on an equal value on U.S. exports including agricultural and auto exports.
Here are the main market moves:
- The S&P 500 was down 0.5 percent to 2,705.98 as of 1:06 p.m. in New York.
- The Stoxx Europe 600 Index fell 0.8 percent, climbing back from an earlier 1.2 percent decline.
- The MSCI All-Country World Index dropped 0.8 percent.
- The MSCI Emerging Market Index decreased 1.1 percent.
- The Bloomberg Dollar Spot Index increased 0.6 percent.
- The euro declined 0.7 percent to $1.1605.
- The British pound fell 0.6 percent to $1.3126.
- The yield on 10-year Treasuries was unchanged at 2.8601 percent.
- Germany’s 10-year yield was little changed at 0.304 percent.
- Britain’s 10-year yield decreased two basis points to 1.255 percent.
- The Bloomberg Commodity Index declined 1.6 percent, the largest fall in two weeks.
- West Texas Intermediate crude added 0.1 percent to $74.21 a barrel, the highest since November 2014.
- Gold dipped 0.9 percent to $1,241.73 an ounce.
— With assistance by Ksenia Galouchko, and Eddie van der Walt