Down, Down, Down. All three U.S. stock indexes ended the day with deep losses. Trade war concerns and additional tariffs still loom. U.S. Treasury yields kept falling. Hong Kong protests intensified and flights were halted at the territory’s airport on Monday. In today’s After the Bell, we…
- wonder whether a trade deal is possible before the 2020 election;
- watch Hong Kong authorities cope with the conflict;
- and look at China’s latest credit data in July.
A Turbulent Start
Stocks plunged again on Monday after recovering some ground last week. The Dow Jones Industrial Average slumped 391.00 points, or 1.49%, to close at 25,896.44. The S&P 500 lost 35.95 points, or 1.23%, to finish at 2882.7, and the Nasdaq Composite fell 95.73 points, or 1.20%, to close at 7863.41.
The U.S.-China trade war remains at the forefront of investors’ concerns. The Trump administration has threatened to impose 10% tariffs on another $300 billion of Chinese imports, which will cover consumer products ranging from apparel to laptops. China has vowed to fight back, and it doesn’t seem any meaningful progress in the negotiation will be made before the 2020 election.
Bond yields have been under pressure for much of the month, as investors fled to safe-haven assets under worries about the slowing economy and a possible recession. The 10-year Treasury yield fell another 9 basis points to settle at 1.64% on Monday, while the 30-year yield fell 11 basis points to 2.13%. Bond prices move in the opposite direction of yields.
Many are also worried about the escalating tension in Hong Kong. Thousands of demonstrators staged sit-ins at the territory’s international airport on Monday, leaving all departing flights and some arrivals canceled. Beijing took a harsher tone on the demonstrators, saying the weekend’s increasingly violent acts marked the emergence of “the first signs of terrorism.” The protests were initially sparked by a bill that would legalize extradition of suspects to mainland China, raising concerns that Beijing is trying to exercise more control over Hong Kong, which is a semiautonomous territory of China.
The Hong Kong protests have already disrupted retail activity and tourism in the region, reducing foot traffic in shopping districts and dampening consumer confidence. Consumer-oriented businesses in both the mainland and Hong Kong will find it increasingly difficult to navigate the political tensions. The iShares MSCI Hong Kong ETF (EWH) fell 3.1% on Monday.
On top of it, lending in China slumped more than expected in July. Chinese banks issued 1.06 trillion yuan ($150.2 billion) of new yuan loans in July, significantly down from 1.66 trillion yuan in June and below the 1.25 trillion yuan consensus by economists. The lower-than-expected credit growth reflects weak demand in the country, partly dented by the protracted trade war with the U.S. Ongoing policy uncertainties might have prevented firms from scaling up their investment plans until things become clearer, which is negative to the economic growth in China.
Write to Evie Liu at email@example.com