Off The Wire
Trump's China trade comments send US stocks tumbling
(Reuters) - Wall Street’s main indexes lost more than 1% on Friday after President Donald Trump said U.S. companies should “immediately start looking for an alternative to China” after Beijing officials earlier retaliated by imposing tariffs on U.S. goods.
Bond yields also fell further after Trump tweeted he was ordering U.S. companies to look at ways to close their operations in China and make more of their products in the United States instead, a rhetorical strike at Beijing as trade tensions mounted.
STOCKS: The S&P 500 erased slight gains and was last down 1.66%
BONDS: U.S. Treasury yields fell; 2s at 1.5127%; 10s at 1.5334%
FOREX: The U.S. dollar index erased slight gains, last off 0.42%
MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST, JONESTRADING, GREENWICH, CONNECTICUT
“There is a lot of worry here. I would say what he’s (Trump) tweeting is disconcerting. It’s a fair reaction from the markets. I don’t think anyone thought we’d get to this level.”
“Interest rate cuts, while they help the economy, they’re not going to be enough to offset a major global trade war. It seems that’s the direction we’re heading in.”
“It’s setting up to be a long-drawn affair that is going to weigh on the global economy.”
KEN POLCARI, MANAGING PRINCIPAL, BUTCHER JOSEPH ASSET MANAGEMENT, NEW YORK
“The market sold off initially then they rallied it back, then Trump starts sending out tweets ordering companies to look for alternative sources. It is mind-boggling, on one day he tells you everything is going great with China and today he is saying everyone get out of China. It is stupid. It is complete stupidity, so the market tanks because it is so erratic. The market is anxious, there is a lot of anxiety whether it is over rates, over trade or another tweet. The path of least resistance is lower right now, not meaning it is going crash, it is just lower and that is exactly what it is doing.”
“That is why the market is taking the most recent dive south is just because of his tweets. Not because of Jackson Hole or anything Powell said. It’s all driven by the anxiety and it’s Friday and a lot can happen over the weekend.”
RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN
“I have had this fear all along, since this whole thing began way back last year, that the ultimate goal here was not a new trade agreement with China but an actual full-blown cold war with China where we cut all ties with them and all trade. We are not there yet, obviously, but each time he sends a tweet like that ...”
“He sends a tweet out about restricting all the carriers from shipping in Fentanyl. Imagine a day where he sends out a tweet where he says all shipments cannot be brought in anymore. We are a long way from that but these types of things are not helping matters any.
“The market clearly does not like these tweets. It’s reaction is decidedly negative.”
MARVIN LOH, SENIOR GLOBAL MARKETS STRATEGIST, STATE STREET, BOSTON:
“Clearly when you look at U.S. yields’ and the dollar’s reaction, there are concerns that these latest comments from Trump on China will push the U.S. into recession. Even since this morning, an additional 10 basis points in rate cuts have been priced into the end of next year. Recession risks are certainly rising.”
SUBADRA RAJAPPA, HEAD OF U.S. RATES STRATEGY, SOCIETE GENERALE, NEW YORK
“There’s a tweet saying that he’s going to respond to China tariffs with something this afternoon, so I think that this is a clear sign of an escalation of a trade war. You have the U.S. raising tariffs, and China responding today, and the U.S. could potentially respond later on today. That’s really what the market’s responding to — this heightened rhetoric between the U.S. and China with no clear path to a timely resolution.”
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