Worries about China tariffs send stock market sharply lower – Financial Post

NEW YORK — Stocks are falling sharply and bond prices are climbing as investors fear that trade tensions will spike between the U.S. and China. The Trump administration announced hefty trade sanctions on China Thursday, while the government in Beijing said it will defend itself. Industrial and technology companies took some of the worst losses while banks dipped along with interest rates. Stock indexes in Europe took sharp losses as well.

KEEPING SCORE: The S&P 500 index skidded 47 points, or 1.7 per cent, to 2,664 as of 11:40 a.m. Eastern time. The Dow Jones industrial average sank 470 points, or 1.9 per cent, to 24,281. The Nasdaq composite gave up 142 points, or 2 per cent, to 7,202. The Russell 2000 index of smaller-company stocks lost 21 points, or 1.4 per cent, to 1,557.

The Toronto Stock Exchange’s S&P/TSX composite index was down 192.11 points to 15,483.17, after 90 minutes of trading.

TRADE WORRIES: The administration is expected to announce restrictions on trade with China, including tariffs on as much as $60 billion worth of Chinese products as well as potential restrictions on Chinese investment. China’s Commerce Ministry said the country will defend its interests. Earlier this month the Trump administration ordered tariffs on imported steel and aluminum and stocks dropped as investors worried about the possibility of tougher restrictions on international trade and smaller profits for corporations. Their fears eased when the administration said some countries will be exempt from the tariffs.

Industrial companies have also been hit by worries about trade because they face a combination of higher prices for imported metals that they use to make their machinery and potential restrictions on sales overseas. On Thursday construction equipment maker Caterpillar fell US$5.30, or 3.4 per cent, to US$150.50 and aerospace company Boeing slid US$12.16, or 3.6 per cent, to US$324.94.

Investors also sold some of the market’s biggest winners. Among technology companies, Facebook fell US$3.32, or 2 per cent, to US$166.07 and Alphabet, Google’s parent company, fell US$34.73, or 3.2 per cent, to US$1,059.27. Amazon slid US$31.44, or 2 per cent, to US$1,550.42.

OVERSEAS REACTION: Germany’s DAX lost 2 per cent and the CAC 40 in France shed 2 per cent. Britain’s FTSE 100 dropped 1.5 per cent. Hong Kong’s Hang Seng dropped 1.1 per cent. The Nikkei 225 in Japan index gained 1 per cent and the South Korean Kospi added 0.4 per cent.

BONDS: Bond prices climbed. The yield on the 10-year Treasury note slipped to 2.80 per cent from 2.88 per cent late Wednesday. When yields and interest rate decrease, banks make smaller profits on loans. Bank of America lost $1.01, or 3.2 per cent, to $30.86 and JPMorgan Chase gave up US$2.75, or 2.4 per cent, to US$111.99.

Utility companies moved higher. When bond yields decline, investors often buy utilities, real estate investment trusts, and other stocks that pay big dividends.

The decline in rates comes a day after the Federal Reserve raised interest rates and said the U.S. economy and the job market continued to improve over the last two months. The Fed expects to raise rates three times this year, although some investors think a fourth increase is possible. The Fed also said it might raise rates three more times next year instead of two.

ABBVIE TUMBLES: AbbVie plunged after it reported disappointing results from a study of its cancer therapy Rova-T. AbbVie cancelled its plans to ask for faster approval of Rova-T as a treatment for small cell lung cancer, but other studies are continuing. AbbVie shed $15.48, or 13.8 per cent, to $96.97. Other health care stocks also sank. Johnson & Johnson fell $2.37, or 1.8 per cent, to $128.81 and Amgen declined $3.81, or 2.1 per cent, to $177.78

ENERGY: Benchmark U.S. crude shed 78 US cents, or 1.2 per cent, to US$64.38 a barrel in New York. Brent crude, used to price international oils, lost 64 US cents to US$68.43 a barrel in London.

CURRENCIES: The dollar fell to 105.41 yen from 106.10 yen. The euro rose to US$1.2307 from US$1.2332.

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