Stocks Recover From Trade Selloff
June 20 2018 - 8:17AM
Dow Jones News
By Riva Gold
-- European stocks rebound
-- Asia markets recover
-- Walgreens up in premarket trading
Stocks around the world recovered most of their losses Wednesday
after escalating worries about U.S.-China trade relations triggered
a selloff in the previous session.
The Stoxx Europe 600 rose 0.8% to erase Tuesday's decline,
following broad-based gains across Asian markets. Futures pointed
to a 0.3% opening rise for the S&P 500.
Investors this week have been more seriously considering the
chance that the world's two largest economies could embark on a
growth-hindering trade war, although many still expect the two
countries to ultimately dial down their plans.
Stocks, commodities and bond yields fell Tuesday after President
Donald Trump called for his administration to identify $200 billion
in Chinese goods for a fresh round of tariffs.
"Our base case is this gets walked back [...] but it's getting
more serious now," said Tim Courtney, chief investment officer at
Exencial Wealth Advisors. "The longer it goes on and the further we
go down this path, the greater the chances are that this could
actually stick."
In U.S. premarket trading, shares of Walgreens Boots Alliance
led gains in the S&P 500 in the wake of news it would be added
to the Dow Jones Industrial Average, replacing General
Electric.
Shares of 21st Century Fox rose 6% and Walt Disney edged up 1.7%
premarket after the companies announced a new merger agreement
Wednesday, increasing the value of the deal and adding a cash
component.
Among decliners, shares of Starbucks fell 3.7% after it said it
will close 150 U.S. stores in its 2019 fiscal year while Oracle
dropped 3.8% after it warned currency conversations would weaken
the company's quarterly performance.
In Europe, bank shares led most of the day's climb, while shares
of basic resources companies added 1.7% as oil and industrial
metals prices mostly moved higher, recovering Tuesday's
declines.
Sectors more reliant on foreign revenue -- such as food and
beverage and auto companies -- lagged behind more domestically
focused ones such as banks. Europe's food and beverage sector
generates roughly 69% of its revenue outside Europe, according to
FactSet.
Foreign revenues are just one source of a company's potential
exposure to a trade shake-up, however, analysts say.
"If it carries on, it's a sort of domino effect because global
supply lines are so integrated [...] you'd start to worry about a
more global downturn if it did escalate," said Chris Iggo, chief
investment officer of fixed income at AXA Investment Managers.
More broadly, because of how late it is in the economic cycle
and the fact that global expansion may be somewhat past its peak,
"anything that's a threat to growth takes on a larger importance,"
he added.
Earlier, Japan's Nikkei Stock Average rose 1.2% and Hong Kong's
Hang Seng advanced 0.8%, after falling 1.8% and 2.8%, respectively,
Tuesday.
Shares of ZTE, a company at the center of recent U.S.-China
tensions, rose 20% in Hong Kong after falling 25% in the previous
session.
The Shanghai Composite Index edged up 0.3% after falling 3.8%
Tuesday, narrowly avoiding a fall into bear market territory.
South Korea's Kospi closed higher for the first time in six
sessions while Australia's S&P ASX 200 index rose 1.2% to its
highest close since January 2008 with support from shares of
banks.
Outside stocks, yields on 10-year Treasurys inched slightly
higher to 2.901% from 2.893% Tuesday afternoon, signaling a small
decline in prices. G old fell 0.2% to $1,275 an ounce.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
June 20, 2018 09:02 ET (13:02 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.