U.S.-China trade tensions have ratcheted up again following President Trump’s decision to level tariffs on the remaining $300 billion of U.S. imports from China. Combine that with China’s decision to let its currency (the yuan) weaken past the 7 per dollar level, and investors may be more concerned than ever that global tensions could drag down the economy and stocks.
More trade worries. Global stocks are modestly lower this morning as investors process reports that the United States is delaying a decision to grant some U.S. companies permission to conduct business with Huawei Technologies, a Chinese tech giant that was blacklisted in May amid the U.S.-China trade dispute. Continue reading
The Treasury yield curve is plunging further into inversion, the point at which long-term yields fall below short-term yields.
As shown in the LPL Chart of the Day, Yield Curve Plunges Further Into Inversion, points on the yield curve are nearing alarming levels. The spread between the 3-month and 10-year Treasury yields fell to -31 basis points (-0.31%), approaching the -50 basis points (-0.5%) threshold that has been predictive of recession within a year . At the same time, the spread between the 2-year and 10-year yields has dropped to 11 basis points (0.11%), closing in on inverted territory for the first time this cycle.
Markets fixate on the yuan fix. The daily level at which China’s central bank fixes the yuan, a central reference point that determines the range in which the exchange rate is allowed to float, has become the latest proxy for trade risk. Continue reading
Stocks opened sharply amid falling rates, trade fears. The People’s Bank of China set its yuan target just a hair stronger than 7 per dollar, a relief to those worried about the psychologically significant round number, but weaker than some had anticipated. Continue reading
U.S. stocks have hit another trade-induced summer storm.
The S&P 500 Index fell 3% on Monday, its worst day since December 2018. The index is now about 6% from record highs in U.S. stocks’ worst bout of volatility since May.