Stocks Slump as China Retaliates in Trade Standoff: Markets Wrap
(Bloomberg) — Global equities fell after China upped the ante in its trade dispute 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 retreated 1% and Nasdaq 100 futures dropped 1.3% as China placed limits on five US entities 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 0.8%.
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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 two basis points to 4.01%. 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’ attention is also turning to the unofficial start of earnings season. JPMorgan Chase & Co. fluctuated in the premarket after beating estimates for trading and investment-banking fees, with Goldman Sachs Group Inc. and Citigroup Inc. also set to report before the US open.
Alongside renewed trade concerns, the surge in AI stocks is stoking bubble fears. In an October Bank of America Corp. survey, 54% of investors said tech valuations look stretched, with concerns over global 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 0.3% for back-to-back gains. The yen strengthened as Japan’s opposition parties weighed a bid to unseat the long-ruling Liberal Democratic Party.
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 fell below $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.
What Bloomberg strategists say…
“At a time when just about every corner of the market is awash in frothy valuations, the latest tensions give traders a reason to take some money off the table. Equity market complacency is writ large in volatility pricing as well, with the VIX Index looking abysmally low in relation to what the rest of this quarter may bring.”
— Ven Ram, Macro Strategist. For the full analysis, click here.
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. A Swiss court has breathed fresh life into a lawsuit filed by investors in Credit Suisse Group AG bonds seeking damages after their investments were wiped out when UBS Group AG rescued the bank in a government-brokered deal. 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 1% as of 7:16 a.m. New York time Nasdaq 100 futures fell 1.3% Futures on the Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 fell 0.8% The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.2% to $1.1550 The British pound fell 0.5% to $1.3268 The Japanese yen rose 0.2% to 152.02 per dollar Cryptocurrencies
Bitcoin fell 3.7% to $111,479.64 Ether fell 7.3% to $3,978.09 Bonds
The yield on 10-year Treasuries declined two basis points to 4.01% Germany’s 10-year yield declined four basis points to 2.60% Britain’s 10-year yield declined seven basis points to 4.59% Commodities
West Texas Intermediate crude fell 2.4% to $58.04 a barrel Spot gold rose 0.5% to $4,132.09 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anand Krishnamoorthy and Sagarika Jaisinghani.
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