Stocks Fall as Hong Kong Unrest Fuels Investor Concerns
August 13 2019 - 8:20AM
Dow Jones News
By Anna Isaac and Steven Russolillo
-- U.S. stock futures slipped
-- German 10-year bund yields hit a record low
-- Gold rose 1%
Stocks dropped around the world as protests in Hong Kong, a
political shake-up in Argentina and global trade tensions continued
to fuel investors' concerns about the global economy.
Futures tied to the Dow Jones Industrial Average slipped 0.3%
Tuesday, after a sharp decline in the index Monday extended a
recent bout of stock volatility. A selloff in Hong Kong stocks
accelerated, with the Hang Seng Index falling 2.1% amid continued
unrest.
In Europe, the benchmark Europe Stoxx 600 index declined 0.8%,
led lower by banks and auto companies. German consumer-goods
company Henkel was among the worst performers, dropping 7.5% after
cutting its full-year growth forecast.
The yield on the German 10-year bund fell to minus 0.617%, a
record intraday low, after a key survey of business expectations
showed a sharp drop in sentiment. Bond yields fall as prices
rise.
Political turmoil in Italy, where lawmakers are looking to
schedule a date for a no-confidence vote in Prime Minister Giuseppe
Conte's government, added to worsening sentiment across Europe,
driving Italian government 10-year bond yields down to 1.670%.
"Yields are likely to stay low for a while," said Oliver Jones,
market economist at Capital Economics. While short-term factors
such as the protests and political shifts are clearly having an
impact on investor sentiment, the long-term outlook determining
bond prices is "a slowing global economy and a trade war which
continues to run," he said.
This week's selloff in Hong Kong stocks meant the Hang Seng
Index -- which has lost 11% since the beginning of July, when the
protests turned more violent -- has joined Korea's Kospi as the
second major global benchmark in negative territory this year.
Cathay Pacific shares fell another 3% after declining 4.9% on
Monday, their steepest drop in three years. They slid after the
Hong Kong airline threatened to fire staff for supporting the
protests. In India, shares in Reliance Industries rose 12% after
Saudi Arabia's state oil company, Aramco, agreed to buy a 20% stake
in the company's oil-and-chemicals business.
Gold, a traditional haven commodity, rose 1%, while the yields
on U.S. 10-year Treasurys dipped to as low as 1.62% from Monday's
1.64%.
Investors have been caught out by the worsening trade tensions,
said Fahad Kamal, chief market strategist at Kleinwort Hambros,
Société Générale's U.K. private bank.
"The market sentiment a few months ago was for trade-war
resolution by the end of the year," he said. "Now they face a
downside surprise."
Later in the day, investors will pay close attention to the
Labor Department's July consumer-price index for signs of
strengthening inflation, to gauge what impact it may have on the
Federal Reserve's interest-rate decisions. In the previous month,
core prices rose 0.1%.
Weakening price pressure was one of the factors behind the Fed's
decision to cut its benchmark rate last month.
The Argentine peso, which fell more than 30% briefly Monday amid
political upheaval in the Latin American country, was largely flat
against the U.S. dollar.
Write to Steven Russolillo at steven.russolillo@wsj.com
(END) Dow Jones Newswires
August 13, 2019 09:05 ET (13:05 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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