Stocks Steady After Brutal Trade War Selloff
Frankfurt (June 26) Global stocks steadied Tuesday, even as investors remained wary of the rising trade rhetoric emanating from Washington and the impact it may have on broader economic growth, with non-dollar assets finding favor amid what could be a major summer challenge for financial markets.
President Donald Trump's recent focus on trade and tariffs, and his administration's plans to curb inward investment in the tech sector in order to combat intellectual property theft, sent markets reeling Monday, but investors still appear to be willing to bet that the President is using his classic deal-making strategy of pushing for the maximum before relenting to a workable compromise.
The fact that officials in China also remained silent overnight was enough to convince investors to test the waters after yesterday's sell off, which clipped 328 points from the Dow Jones Industrial Average and push the benchmark just a few percentage points away from correction territory.
Wall Street could claw some of that back this morning, however, although equity futures are currently pointing to a 24 decline for the Dow and a 1.5 point slip for the broader S&P 500 . The tech-focused Nasdaq Composite , which slumped 2.09% yesterday, is poised for a modest 10 point rebound.
General Electric Co. (GE) shares were an active mover in pre-market, rising 4.7% to $13.36 each after the struggling conglomerate confirmed earlier reports it is planning to spin off its healthcare division and sell its stake in oil services group Baker Hughes (BHGE) .
GE said the plans, which follow its ongoing strategic review, will mark a shift in focus towards its power, aviation and renewable-energy businesses and create "a simpler, stronger, leading high-tech Industrial company". The group also said it will maintain its dividend until the healthcare unit is separated, but will "adjust" it after that to put it "in line with industrial peers". The announcements comes as the former equity market bellwether faces its first day of trading outside of the Dow after having been turfed from the benchmark last week by S&P Dow Jones Indices in favor of the Walgreens Boots Alliance Inc (WBA)
That said, dollar-denominated assets did not appear to be the market's flavor overnight, with the U.S. dollar index slipping 0.1% to 94.21 and the euro rising to a two-week high of 1.1722. Benchmark 10-year U.S. Treasury bond yields were also softer, rising to 2.90% as investors gingerly moved cash into riskier markets or shunned the greenback altogether.
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Stocks overnight were also broadly positive, although the early hours of the session followed Wall Street's lead with heavy selling. The region-wide MSCI Asia ex-Japan index was marked just 0.1% to the downside heading into the close, held down by extended weakness in China, while Japan's Nikkei 225 managed to shrug-off a stronger yen and claw its way into a 0.02% gain to end the session at 22,342.00 points.
China's markets, however, which are both heavily exposed to tech and sitting on the front lines of the global trade war, continued to suffer, with the Shanghai Composite index falling 0.51% to 2,844.65 points, putting the benchmark into "bear market" territory, a condition which defines a market that has fallen at least 20% from its previous peak.
It's official! #China has entered a bear market. Shanghai composite down more than 20% from its January high.
TheStreet
