World stock index dips from five-month high

New York — Gains in US stocks came to a halt on Thursday as concerns rose among investors that the US-China trade dispute will intensify, while economic turmoil in Turkey and Argentina sent those countries’ currencies tumbling.

Stock markets and major government bond yields have risen in recent weeks on hopes that a global trade war can be averted, particularly with the leaders of the US and Canada optimistic they can reach a new North American Free Trade Agreement (Nafta) by Friday.

Investor sentiment darkened, however, on the prospect that US tariffs on an additional $200bn worth of Chinese goods may likely take effect in late September. “I think this is an environment in which, if not for trade news, we would be trading higher and we have seen that with the bumps in the Mexico trade talks,” said Art Hogan, chief market strategist at B Riley FBR in New York.

Argentina’s peso tumbled again. On Thursday, the country’s central bank hoisted its benchmark interest rate by 15 percentage points in a bid to control rampant inflation after the peso plummeted to a record low 39 to the dollar. The International Monetary Fund (IMF), meanwhile, is studying a request from Argentina to speed up disbursement from a $50bn loan programme.

Turkey’s lira was also pressured anew after reports that Turkish central bank deputy governor and rate-setter Erkan Kilimci is leaving. Earlier this month, the country’s currency crisis sent the lira plunging to a record low against the dollar and sparked concerns about emerging-markets investments.

US treasury yields fell on Thursday morning after a measure of underlying inflation hit the US Federal Reserve’s 2% target for the third time this year. The year-on-year increase in the core personal consumption expenditures (PCE) price index, excluding the volatile food and energy components— rose 0.2% after edging up 0.1% in June.

The Dow Jones Industrial Average fell 111.9 points, or 0.43%, to 26,012.67; the S&P 500 lost 8.55 points, or 0.29%, to 2,905.49; and the Nasdaq Composite dropped 10.86 points, or 0.13%, to 8,098.83.

The dollar index rose 0.26%, with the euro down 0.5% to $1.1647.

Benchmark 10-year US treasury notes last rose 5/32 in price to yield 2.8658%, down from 2.882% late on Wednesday.

Earlier, Asian stocks lost gains as signs emerged that tariffs are beginning to hurt the Chinese economy. A Reuters poll showed activity among China’s manufacturers probably slowed for the third straight month in August.

European shares followed suit on concerns over the effects of trade tensions between the world’s two largest economies, including reduced Chinese demand for exports. A pan-European stock index dropped 0.3%, knocking the MSCI world equity index, which tracks shares in 47 countries, off a five-month high.

The MSCI world equity index was last down 0.5%. The Shanghai Composite Index closed down 1.1% and Hong Kong’s Hang Seng ended 0.9% lower.

US crude rose 0.3% to $69.73 a barrel and Brent was last at $77.65, up 0.25% on the day, as US crude inventories dropped and Iranian crude shipments fell because of US sanctions.

Reuters