17 Sep 2018 21:30 (GMT)

DJ Asian Morning Briefing: U.S. Stocks Fall on Trade Worries

MARKETS AT A GLANCE 
(Data as of approximately 5 p.m. ET) 
 LAST CHANGE % CHG 
DJIA 26062.12 -92.55 -0.35% 
Nasdaq 7895.79 -114.25 -1.43% 
S&P 500 2888.80 -16.18 -0.56% 
Russell 2000 1703.55 -18.17 -1.06% 
Global Dow 3078.00 -0.71 -0.02% 
Japan: Nikkei 225 23094.67 273.35 1.20% 
Stoxx Europe 600 378.31 0.46 0.12% 
UK: FTSE 100 7302.10 -1.94 -0.03% 
 PRICE CHG YIELD 
U.S. 2 Year 0/32 2.778 
U.S. 5 Year 2/32 2.893 
U.S. 10 Year 2/32 2.992 
Australia 10 Year -5/32 2.632 
China 10 Year 6/32 3.659 
India 10 Year 0/32 8.114 
Japan 10 Year 0/32 0.112 
German 10 Year -2/32 0.459 
 LAST(MID) CHANGE 
Australia $ (AUD/USD) 0.7183 0.0006 
Yen (USD/JPY) 111.86 0.02 
S. Korean Won (USD/KRW) 1126.46 0.13 
Chinese Yuan (USD/CNY) 6.8579 0.0007 
Euro (EUR/USD) 1.1683 -0.0001 
WSJ Dollar Index 89.34 0.01 
 LAST CHANGE % CHG 
Crude Oil 68.76 -0.23 -0.33% 
Brent Crude 77.91 -0.18 -0.23% 
Gold 1205.7 4.6 0.38% 
SNAPSHOT 

U.S. stocks fell amid lingering trade concerns. Treasurys slipped as investors digested mixed economic data. Oil prices edged lower as sanctions on oil-producing Iran loomed. Gold rose on the back of a weaker dollar.

OPENING CALL 

The sentiment-driven negative trade on luxury should end after the upcoming quarterly earnings season, as Chinese demand–driven by younger consumers–is still booming, Berenberg analysts said. There are currently no signs of a luxury slowdown in China, the brokerage said, despite bearish investors’ fears. Berenberg said investors underestimate "the unique characteristic of this luxury cycle that is driven by the more resilient millennial consumer," but should change their negative stance after the next quarterly results come in. However, high-end and more cyclical categories within the sector, such as watches, could still be negatively hit by concerns stemming from China and foreign-currency volatility, Berenberg analysts said.

EQUITIES 

U.S. stocks slipped, sending the Nasdaq Composite to its biggest one-day loss since July, as fresh trade threats between the U.S. and China stoked caution among investors.

Signs that the U.S. trade fight with China is set to escalate this week capped stock gains and sent the dollar lower. The Trump administration is planning to unveil new tariffs on $200 billion in Chinese goods, with President Trump saying Monday that he would make an announcement after the end of the trading day. (Please update this language after the announcement.) Chinese officials have said they could pull out of trade talks if President Trump carries out his plans.

"The big question is what happens with tariffs, because they’re the one thing people worry could cause the economy to roll over," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.

The Dow Jones Industrial Average fell 92.55 points, or 0.4%, to 26062.12, ending near its low for the day. The S&P 500 lost 16.18 points, or 0.6%, to 2888.80, snapping a five-day winning streak, and the Nasdaq Composite dropped 114.25 points, or 1.4%, to 7895.79.

Even with Monday’s pullback, U.S. stocks remain near records. Analysts have attributed the relative resilience of the market to trade developments so far being incremental and having a minimal impact on the U.S. economy.

"We already have real trade issues," but it doesn’t appear that the U.S. and China have reached the point of no return, said Jason Ware, chief investment officer at Albion Financial Group. "If we get there, that will be truly problematic for the economy and markets," he said.

Shares of technology-focused companies retreated, weighing on the Nasdaq.

FOREX 

The dollar fell, as investors focused on an intensifying trade battle between the U.S. and China.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.3% to 89.33.

President Trump’s economic conflict with China is set to escalate this week, as the administration plans to unveil fresh tariffs on $200 billion in Chinese products entering the U.S. and Beijing debates new ways to retaliate against U.S. corporations doing business in China.

The ramped-up trade threats between the two countries have buoyed the dollar in recent weeks, as many investors believe the U.S. will suffer less than other countries in a global trade conflict.

At the same time, some investors were encouraged by reports that the White House may lower the tariff rate on the $200 billion in goods to about 10%-down from the 25% level they said in early August they would impose on those imports.

BONDS 

U.S. government bond prices fell as investors analyzed an array of conflicting data about the economy and Federal Reserve policy.

The yield on the benchmark 10-year Treasury swung back and forth before closing at 3.001%, the highest since May 23, from 2.992% Friday. The high yield for the year is 3.109%, reached May 17. Yields rise as bond prices fall.

Yields briefly rose Monday, then declined, then climbed again, as investor sentiment shifted against a backdrop of a growing supply of corporate and government bonds. Investors are also assessing the importance of recent climbs in wages, weakening price pressures in other parts of the economy and plans by U.S. officials to impose additional tariffs on goods imported from China.

Recent Labor Department reports showed that average hourly earnings rose at 2.9%, the fastest pace in August since 2009, but that inflation has yet to take root throughout the broader economy, as the consumer-price index slowed last month to 2.2%.

COMMODITIES 

Oil prices edged lower, giving back gains as traders weighed the potential impact of Iran sanctions.

Light, sweet crude for October delivery declined 0.1% to $68.91 a barrel on the New York Mercantile Exchange, after trading as high as $69.71 earlier in the session. Brent, the global benchmark, closed down 4 cents to $78.05 a barrel.

Prices rose Monday morning on a weaker U.S. dollar and expectations of a global supply crunch, but reversed course as the trading day went on.

"Every time we make a run at $70, we meet some stiff resistance," said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. "We’re kind of in this grind" between $67 and $71, he added.

Dollar-denominated commodities like oil tend to have an inverse relationship with the greenback. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 of its peers, was trading down 0.3% Monday.

More broadly, investors "aren’t ready to sell off oil" in the run up to U.S. sanctions being imposed on Iran’s oil industry at the start of November, said Ole Hansen, head of commodity strategy at Saxo Bank.

Top buyers of Iranian crude, including China and India, have already begun to reduce imports, potentially tightening global supply. Total exports of Iranian crude fell by 280,000 barrels a day in August, to stand at 1.9 million barrels a day, the International Energy Agency reported last week.

In other commodity news, copper prices inched higher, supported by a weaker dollar despite the latest escalation in the trade fight between the U.S. and China.

Front-month copper for September delivery added 0.2% to $2.6335 a pound on the Comex division of the New York Mercantile Exchange. Trade worries have punished prices, pushing them down 20% from their June four-year highs with investors betting that tariffs will slow the Chinese economy and lower consumption of materials.

Among precious metals, front-month gold for September delivery rose 0.4% to $1,199.70 a troy ounce, boosted by the weaker dollar. The dollar’s strength has been a bearish factor for gold this year, while higher short-term Treasury yields have also weighed on prices. The yellow metal is down 8.2% in 2018 and hit its lowest point since early 2017 this summer.

TODAY'S HEADLINES 
Trump to Lay Out Line on China Trade 

President Trump said his administration would make an announcement about China after the close of markets, without elaborating.

Oracle Revenues Up 1%, Sending Shares Lower After-Hours 

Oracle Corp. managed to boost revenue during its latest quarter, but the performance may further increase pressure on the company to explain how it plans to win customers over to its cloud-based offerings.

Cigna, Express Scripts Say Merger
 Cleared by Justice Department 

Cigna and Express Scripts Holding said the Antitrust Division of the U.S. Department of Justice cleared their pending merger.

U.K. to Face 'Substantial Costs' From No-Deal Brexit, Warns IMF 

The International Monetary Fund said Monday that an abrupt and messy break from the European Union would cause harm to the British economy, adding that the U.K. won’t be prepared for such an outcome when Britain leaves next March.

China Rebukes Local Officials
 Over Debt Pile 

China’s Finance Ministry is upping the pressure on local governments that run up debt, reprimanding dozens of officials in one province that has seen its debt troubles spill into public protests.

Fox Extends Sky Offer; Gets 0.07% Acceptances 

21st Century Fox has extended the acceptance period for its GBP24.5 billion cash offer for the rest of Sky after getting a low level of support, just days ahead of a deadline for Rupert Murdoch’s firm to raise its offer for the British broadcaster.

Singapore Authorities Question Deutsche Bank Executive Over
 1MDB Scandal 

A senior Deutsche Bank executive has been interviewed by authorities in Singapore as part of their probe into the multibillion-dollar scandal at Malaysian state fund 1Malaysia Development Bhd., or 1MDB.

Trump Adviser Kudlow Blames Deficits on Spending, Not Tax Cuts 

(MORE TO FOLLOW) Dow Jones Newswires

September 17, 2018 17:30 ET (21:30 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

17 Sep 2018 21:30 (GMT)

DJ Asian Morning Briefing: U.S. Stocks Fall on Trade -2-

A top economic adviser to President Trump said Monday the U.S. is ready to engage in serious trade talks with China, in comments that also shrugged off massive U.S. government budget deficits as largely a function of too much government spending and not tax cuts.

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TODAY'S CALENDAR 
(Times in GMT, followed by country and event) 
0130 Australia Q2 Residential Property Price Indexes: Eight Capital Cities 
0130 Australia September Reserve Bank Board Monetary Policy Meeting Minutes 
0715 E.U. ECB President Mario Draghi speaks at ACPR event 
0800 Italy July Industrial turnover & orders 
0830 Hong Kong August Underemployment 
0830 Hong Kong August Unemployment 
0900 France OECD Effective Carbon Rates report launch 
1145 U.S. 09/15 The Retail Economist/Goldman Sachs Weekly Chain Store Sales 
 Index 
1230 Canada July Monthly Survey of Manufacturing 
1255 U.S. 09/15 Johnson Redbook Retail Sales Index 
1400 U.S. September NAHB Housing Market Index 
2000 U.S. July Treasury International Capital Data 
2000 U.S. U.S. Secretary of State Mike Pompeo meets World Bank 
 President Jim Yong Kim 
2030 U.S. 09/14 API Weekly Statistical Bulletin 
2200 New Zealand Q3 Westpac McDermott Miller Consumer Confidence Index 
 N/A Japan Bank of Japan Monetary Policy Meeting 
 N/A U.K. Exiting the European Union Committee publishes report on 
 its inquiry into progress of Brexit negotiations 
 N/A U.S. Trumps host Polish counterparts at the White House 
 N/A U.S. U.N. General Assembly convenes 

(END) Dow Jones Newswires

September 17, 2018 17:30 ET (21:30 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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