Global Stocks, Bond Yields Slip
By Will Horner
European stocks edged down after a mixed session in Asia on Thursday, while government bonds yields dipped, as fears of a protracted trade dispute between the U.S. and China led investors to fear a hit to the global economy.
The Stoxx Europe 600 slipped 0.2% in the opening minutes of trade, while the yield on the U.S. 10-year Treasury note fell to 2.358%, flirting with its lowest level since December 2017. The yield on 10-year German government bonds fell deeper in negative territory Thursday and was last at -0.116%.
Yields fall as investors drive up the price of government bonds, considered havens amid growth concerns.
Investors dialed back hopes for a U.S.-China trade deal after President Trump signed an executive order Wednesday allowing the U.S. to ban telecommunications network equipment and services from "foreign adversaries." While not naming any particular country or company, officials said its targets were likely Chinese technology companies Huawei and ZTE.
That came just a day after moves by the Trump administration to postpone a decision on whether to impose tariffs on automobiles had sparked a small market rally for U.S. and European stocks.
The Stoxx 600's auto and parts subindex led the index lower Thursday, with a drop of 1.1%. European car companies Peugeot, Daimler and Porsche all fell more than 1.8%, largely erasing gains made in the previous session on the news of the delayed tariff decision.
In Asia, Japan's Nikkei fell 0.6% and shares on Korea's Kospi dropped 1.2%. Indexes in mainland China and Hong Kong made modest gains after paring earlier losses.
In the U.S., futures pointed to opening drops of 0.3% for both the S&P 500 and the Dow Jones Industrial Average.
Even without the U.S.-China trade dispute, global growth was facing a range of headwinds, according to strategists at UBS in a note Thursday.
"Chinese fiscal stimulus is likely to have peaked, unless the U.S. actually does impose higher tariffs on Chinese exports. Future tariffs on EU autos are expected to be levied, and we are now more cognizant of downside risk here given volatility around U.S.-China trade negotiations, " the strategists wrote.
Apparent progress from the trade negotiations between the U.S. and China had prompted a period of relative calm for global markets this year, following a sharp bout of volatility at the end of 2018.
But a recent escalation of tensions between Beijing and Washington has taken investors largely by surprise, and markets have become highly sensitive to Mr. Trump's frequently changing messages on trade, said Jasper Lawler, Head of Research at London Capital Group.
Mr. Trump's comments are "almost single-handedly driving the markets right now," he said. "The President's almost haphazard approach, of sounding optimistic over trade talks before turning confrontational--that is creating high levels of uncertainty and volatility."
The WSJ Dollar Index, which measures the dollar against a basket of currencies, was flat.
Brent crude oil, the global benchmark, was up 0.4% at $72.04 a barrel. Gold was up slightly at $1,298.05 a troy ounce.
Write to Will Horner at email@example.com