Stocks Fall as China Retaliation Rattles Traders: Markets Wrap
(Bloomberg) — Global equities retreated after China upped the ante in its trade standoff with the US, stirring fresh concerns over tensions between Beijing and Washington at a time when stocks look stretched after a relentless rally.
S&P 500 contracts fell 0.9% and Nasdaq 100 futures dropped 1.1% as China placed limits on five US units tied to one of South Korea’s biggest shipbuilders and threatened further retaliation. All members of the Magnificent Seven slid in premarket trading, while European stocks slipped 0.9%.
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The standoff also sparked a rally in global bonds as investors pulled back from risk, sending the 10-year US Treasury yield down one basis point to 4.02%. Gold swung between gains and losses, while silver dipped after hitting a record.
Tuesday’s moves mark a third day of stock swings, with fears of an escalation in US–China tensions returning to the forefront. The S&P 500 has gained more than 30% since its April low, as initial trade concerns gave way to unrelenting optimism over artificial intelligence and the resumption of US interest-rate cuts.
“The sharp reversal shows how quickly sentiment can shift,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “With elevated valuations already making markets vulnerable, expect continued volatility.”
Traders are also focusing on the unofficial start of the earnings season. JPMorgan Chase & Co. fluctuated in the premarket after beating estimates for trading and investment-banking fees. Goldman Sachs Group Inc. fell more than 2% after a slight miss in equities sale and trading revenue. Citigroup Inc. rose 1% after revenue beats in every division.
Alongside trade concerns, the surge in AI stocks is increasingly stoking bubble fears. In an October Bank of America Corp. survey, 54% of investors said tech valuations look stretched, with concerns over equity prices also at a record.
Still, some strategists said bouts of volatility are to be expected at current valuations, but the overall environment remains supportive for stocks.
“Trade wars and tariffs do generate headlines and uncertainty, but we see the eventual impact as limited,” wrote Mohit Kumar, chief strategist for Europe at Jefferies International.
The dollar rose 0.2% to head for back-to-back gains. The yen strengthened as Japan’s opposition parties weighed a bid to unseat the long-ruling Liberal Democratic Party.
In the absence of US economic data during the ongoing government shutdown, investors will focus on remarks later today by Federal Reserve Chair Jerome Powell and Governor Michelle Bowman for clues on the rate outlook. Money markets continue to almost fully price in two quarter-point cuts by December.
“Any less-dovish tone from Fed Chair Powell has the potential to add pressure to an already fragile and heavy equity market today,” said Tom Essaye at The Sevens Report.
Meanwhile, cryptocurrencies extended their declines. Bitcoin, the largest token by market value, fell as much as 4% to around $111,200, while Ether dropped 7.8% to below $4,000. Smaller tokens fell even further, wiping out more than $150 billion from the total cryptocurrency market value in 24 hours, according to CoinGecko data.
Brent crude dropped toward $62 a barrel, extending the year-to-date decline to more than 16%, after the International Energy Agency said the record oil glut will be larger than previously estimated.
Corporate News:
General Motors Co. is incurring $1.6 billion in charges related to paring back electric-vehicle production plans, underscoring the toll on US carmakers from flagging federal support for plug-in vehicles. BlackRock Inc. pulled in $205 billion of client money in the third quarter as the world’s largest fund manager expanded its footprint in private credit and alternative assets. Prices on claims tied to Credit Suisse Additional Tier 1 bonds, which were wiped out in 2023, have risen rapidly after a Swiss court gave a partial win to investors seeking damages. Ericsson AB’s shares jumped the most in seven years after its third-quarter profit and cash flow soared thanks to the sale of its its call-routing business Iconectiv. EasyJet Plc jumped the most in almost three years following a report that Mediterranean Shipping Co. SA is considering a bid for the budget airline alongside an investment firm. Michelin shares fell after the tiremaker lowered its financial guidance for the year following a bigger-than-expected sales slump in North America. BP Plc said a weak oil trading performance hit the company’s profit while production increased for a second straight quarter. Samsung Electronics Co. reported its biggest quarterly profit in more than three years in a sign of healthy AI chip demand, though investors hoping for outsized numbers cashed in some of the company’s recent stock market gains. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.9% as of 8:21 a.m. New York time Nasdaq 100 futures fell 1.1% Futures on the Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 fell 0.9% The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro was little changed at $1.1560 The British pound fell 0.5% to $1.3270 The Japanese yen rose 0.2% to 152.00 per dollar Cryptocurrencies
Bitcoin fell 4% to $111,204.89 Ether fell 7.9% to $3,953.95 Bonds
The yield on 10-year Treasuries declined one basis point to 4.02% Germany’s 10-year yield declined four basis points to 2.60% Britain’s 10-year yield declined eight basis points to 4.58% Commodities
West Texas Intermediate crude fell 2.1% to $58.24 a barrel Spot gold rose 0.4% to $4,128.06 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anand Krishnamoorthy and Sagarika Jaisinghani.
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