Monday, 12 August 2019 18:35

Dow falls 360 points, loses grip on 26,000 as unrest in Asia weighs on markets

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Stocks traded sharply lower Monday afternoon, building on the previous week’s decline on lingering worries over U.S.-China trade tensions and continued unrest in Hong Kong.

How are the major benchmarks performing?

The Dow Jones Industrial Average DJIA, -1.40%[1]  fell 360 points, or 1.4%, to 25,929, while the S&P 500 index  SPX, -1.23%[2]  shed 35 points, or 1.2%, to 2,884. The Nasdaq Composite Index COMP, -1.23%[3]  dropped 98 points to 7,861, down 1.2%.

The Dow saw a 0.8% fall last week to end Friday at 26,287.44, while the S&P saw a 0.5% weekly fall to 2,918.65. The Nasdaq finished 0.6% lower last week at 7,959.14.

What’s driving the market?

Equity investors remain wary of U.S.-China trade tensions, which increased last week after China last Monday allowed its yuan currency to weaken, trading above 7 per dollar. The U.S. Treasury responded by formally branding China a currency manipulator.

Further fueling concern were comments by President Trump Friday morning that planned trade talks in September might not happen. The rhetoric follows the announcement earlier this month[4] that the U.S. planned to implement a 10% tariff on the $300 billion in annual Chinese exports that have so far avoided new trade duties.

“Unlike previous rounds of tariffs deployed by this administration, these new tariffs would largely impact the consumer, with duties being placed on goods such as clothing, footwear and toys,” wrote Jason Pride, chief investment officer of private wealth and Glenmede in a Monday research note. “The consumer has acted as the engine driving forward this record-long expansion as manufacturing slows, but these tariffs may erode their spending power,” he added.

Meanwhile, investors are also monitoring events in Hong Kong, where authorities canceled more than 130 flights[5] as thousands of demonstrators thronged the city’s airport to protest police for their handling of this summer’s protests.

See: In Hong Kong, police again clash with protesters, with no end in sight[6]

Goldman Sachs, in a Sunday note to clients, said it now expects a 0.6% drag on the U.S. economy due to trade-war developments, up from its earlier estimate of 0.2%. Goldman lowered its forecast for fourth-quarter gross domestic product by 20 basis points to 1.8%.

Read: Trade war is raising the risk of U.S. recession, Goldman Sachs warns[7]

“Fears that trade war will trigger a recession are growing,” wrote Jan Hatzius, the firm’s chief U.S. economist. ...

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