Market Insights 12/3/2019

U.S. stocks finished solidly lower after President Trump indicated that it may be better to wait until after the 2020 election to cement a U.S.-China trade deal.

The disappointing delay comes just a day after an announcement that the President will likely reinstate tariffs on steel from Argentina and Brazil and threats of increased tariffs on French goods in retaliation for a French tax aimed at U.S. big tech.

Treasury yields fell and took the U.S. dollar with them, while gold rose. Crude oil continued its recent rally.

The Markets…

The Dow Jones Industrial Average fell 280 points (1.0%) to 27,502

The S&P 500 Index shed 21 points (0.7%) to 3,093

The Nasdaq Composite dropped 47 points (0.6%) to 8,521

In moderate volume, 859 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.14 to $56.10 per barrel and wholesale gasoline was off $0.01 at $1.56 per gallon

The Bloomberg gold spot price was up $13.80 to $1,468.90 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 97.74

What’s bad for stocks is good for bonds

Treasuries were up solidly, as the weakness in equites sparked a bull-flattener, in which longer term yields fall more than shorter term yields.

The yield on the 2-year note was 7 basis points (bps) lower at 1.53%, while the yields on the 10-year note and the 30-year bond fell 10 bps and to 1.70% and 2.15%, respectively.

Europe mixed, Asia lower as trade tensions heat up

Global equites were mostly lower amid the flare up in trade tensions. Optimism regarding a “phase one” U.S.-China trade deal, a key catalyst to the recent rally in the global stock markets, faded further after U.S. President Donald Trump said he does not have a deadline for an agreement and suggested that it may be better to wait until after the 2020 election. Yesterday, during a war of words between President Trump and French President Emmanuel Macron, there was a threat that the U.S. would increase tariffs on French goods in retaliation for French taxes directed toward U.S. big tech.

The euro ticked higher versus the U.S. dollar and the British pound gained ground with the December 12th U.K. general election drawing near, which could have a substantial impact on the process of the U.K. leaving the European Union (Brexit) next year.

In Asian economic news, South Korea’s Q3 GDP growth was unrevised at a 0.4% quarter-over-quarter pace of growth, down from the 1.0% expansion posted in Q2, while the Reserve Bank of Australia kept its policy stance unchanged, after cutting rates three times since June this year.

The U.K. FTSE 100 Index fell 1.8%, France’s CAC-40 Index declined 1.0%, Switzerland’s Swiss Market Index dropped 1.1%, and Spain’s IBEX 35 Index dipped 0.2%, while Italy’s FTSE MIB Index finished flat and Germany’s DAX Index advanced 0.2%.

In Asia, Japan’s Nikkei 225 Index declined 0.6%, Australia’s S&P/ASX 200 Index dropped 2.2%, South Korea’s Kospi Index decreased 0.4% and India’s S&P BSE Sensex 30 Index traded 0.3% lower.

China’s Shanghai Composite Index did manage to gain 0.3% despite the flared-up trade tensions, while the Hong Kong Hang Seng Index decreased 0.2%.