· Stocks fell on Monday as bond yields resumed their August downturn, raising concerns about the state of the economy.
The benchmark 10-year Treasury yield, which fell to its lowest since 2016 last week, dipped to 1.63%. The spread between 2-year and 10-year Treasury yields narrowed to only 6 basis points on Monday, near its lowest level since 2007.
Dow Jones Industrial Average fell 391 points, or 1.49%, to 25,896.44, while the S&P 500 dropped 36.21 points, or 1.24%, to 2,882.44 and the Nasdaq Composite is down 1.2% to 7,863.41. It was the second down day in a row for the market, which had staged a remarkable recovery last week until the selling returned again on Friday.
“The bear is alive and kicking,” Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, said in a note on Monday. “We think the failed breakout last week for the S&P 500 confirms we are still mired in a cyclical bear market.”
Bank stocks declined as interest rates dived. Bank of America and Goldman Sachs both dropped more than 2%, while J.P. Morgan slid 1.87%. The SPDR S&P Bank ETF is down 2.1% on Monday.
Also hurting stocks were the intensified Hong Kong protests, which soured investor sentiment already aggravated by the trade dispute between Washington and Beijing. Hong Kong International Airport cancelled all departures for the remainder of the day, citing serious disruptions due to intensifying protests.
Adding to the geopolitical risks were the Argentina’s election results which took markets by surprise as the country’s center-right leader, President Mauricio Macri, performed poorly in primary elections. The outcome triggered a sell-off in peso and Argentina’s stocks, which are down 30%.
· European stocks closed lower on Monday as investors monitored escalations in the U.S.-China trade war.
The pan-European Stoxx 600 closed provisionally down nearly 0.3%. The index had posted an almost 1% gain earlier in the session. Banks were the biggest fallers, led by a 5% slide for CYBG, while chemicals stocks were the best performers.
· Stocks in Asia traded lower on Tuesday morning as Hong Kong attempts to return to normalcy following protests in the last few days.
The Hong Kong airport reopened on Tuesday after operations were crippled on Monday due to protests, which have turned increasingly violent since June.
The Nikkei 225 in Japan dropped 1.48% in early trade following its return from a holiday, while the Topix index shed 1.41%.
South Korea’s Kospi slipped 0.63%, while the S&P/ASX 200 in Australia declined 0.31%.
Overall, the MSCI Asia ex-Japan index shed 0.26%.
The Chinese yuan midpoint will be watched when it comes out around 9:15 a.m. HK/SIN. The People’s Bank of China set the midpoint above the psychologically important 7-yuan-per-dollar level for the third consecutive session on Monday. The Chinese currency has been closely watched by investors in recent days after it weakened past the 7 level against the greenback last week, leading the U.S. Treasury Department to designate China a currency manipulator.
Reference: CNBC
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