Global Stocks, Bond Yields Slip
By Will Horner
European stocks edged down after a mixed session in Asia on Thursday, while government bond 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 2.365%, flirting with its lowest level since December 2017. The yield on 10-year German government bonds fell deeper in to 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, a move officials said targeted Chinese technology companies Huawei and ZTE.
That came a day after the Trump administration postponed a decision on whether to impose tariffs on autos, sparking a small market rally for U.S. and European stocks.
The Stoxx Europe 600's auto and parts subindex led the index lower Thursday, with a drop of 1%. European car companies Peugeot, Daimler and Porsche all fell more than 1%, erasing some of the gains made in the previous session on the news of the delayed 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, as recent weak Chinese data raised investors' hopes that Beijing would increase stimulus measures to guard against growing signs of economic weakness.
In the U.S., futures pointed to flat opens for both the S&P 500 and the Dow Jones Industrial Average.
Sluggish data released Wednesday on U.S. retail sales and factory output renewed growth concerns about the world's largest economy, though it has recently outperformed the faltering economies of Germany and China.
"One thing is for sure, the U.S. economy is losing momentum and that is going to continue the downward trend in global economic growth," said Kit Juckes, Global Fixed Income Strategist at Société Générale, adding that he sees a U.S. economic recession in 2020.
The U.S.-China trade spat and potential for U.S. tariffs on European imports added to those concerns, said 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.
The re-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 0.7% at $72.26 a barrel. Gold was down 0.2% at $1,295.70 a troy ounce.