Breaking News

Stocks struggle near three-week lows but no respite for emerging markets

Stock MarketsSep 12, 2018 08:20AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. People walk through the lobby of the London Stock Exchange in London

By Sujata Rao

LONDON (Reuters) - Fresh sparring between Washington and Beijing over trade kept up pressure on world markets on Wednesday, with equities struggling and emerging currencies mostly weaker, led by the Indian rupee hitting a record low.

A bruising session in Asia took MSCI's main Asia-Pacific ex-Japan index to a 10th straight day in the red, its longest losing streak since September 2000.

Bourses in Shanghai, Hong Kong and Tokyo all closed lower, taking emerging equities to a new 15-month low. MSCI's all-country equity index inched up marginally, looking to extend two sessions of modest gains that had snapped six straight days of losses.

"What the market needs is a signal of some relaxation in trade rhetoric, a bit of climbdown," said Salman Ahmed, chief investment strategist at Lombard Odier. "That should be enough as (economic) fundamentals are strong. But you do need a trigger point and so far we have not seen it."

The months-long escalation in tensions between the world's two biggest economies shows no sign of letting up. President Donald Trump said on Tuesday the United States was taking a tough stance with China. That cemented expectations that new levies on Chinese exports will soon be announced.

Earlier China told the World Trade Organization (WTO) it wanted to impose $7 billion a year in sanctions on the United States in retaliation for non-compliance with a ruling in an earlier trade dispute.

Equity markets also faced pressure from U.S. two-year bond yields which touched a decade peak on Tuesday, partly spurred by data that provided yet more evidence of the U.S. economy's strength.

That data had pushed Wall Street to a strong close, led by tech and energy shares, and futures for the tech-heavy Nasdaq benchmark were up 0.2 percent on Wednesday. The S&P500 and Dow Jones indexes looked set for flat openings, however.

In Europe, a pan-European index rose 0.2 percent off recent five-month lows though it gave up earlier strong gains.

Ahmed said another positive catalyst for markets could be signals from the U.S. Federal Reserve that it could slow the pace of interest rate rises. But given the torrent of strong U.S. data, that looks unlikely - data this week showed U.S. small business optimism at the highest level on record.

"In 2015 when emerging markets got into a lot of trouble the Fed recognized the international spillover effect. This time that has not happened," he added.


The trade rows and higher U.S interest rates have pushed an index of emerging currencies almost 7 percent lower this year. The yuan touched 2-1/2 week lows against the dollar, leading Asian peers lower and keeping the Australian dollar - heavily linked to Chinese trade - close to its lowest since February 2016.

The dollar inched down against a basket of currencies as hopes grew of concessions by Canada that would resolve disputes over reworking the North American Free Trade Agreement.

But emerging currencies stayed under pressure.

While the worst-hit Turkish lira and Argentine peso have steadied off record lows, the Indian rupee is continuing to plumb new troughs, taking year-to-date losses versus the dollar to more than 12 percent.

"The rupee ... is symptomatic of the overall situation in emerging markets, but it also embeds some idiosyncratic problems - with the fiscal deficit growing and the current account deficit widening on (the) back of rising commodity prices," said Cristian Maggio, head of emerging markets strategy at TD Securities.

Markets will also keep an eye on U.S. bonds. Ten-year yields stand just off the one-month highs hit on Tuesday after data showing sustained strength in the jobs market and the Treasury started a record debt sale amounting to almost $150 billion.

Political risk meanwhile returned to the radar of investors in Italy and Britain. Italian bond yields, which fell to six-week lows in recent days, rose after local media reported 5-Star, one of the parties in the ruling coalition, was demanding 10 billion euros in the budget to implement plans for a basic universal income.

The British pound also slipped off five-week highs hit this week against the dollar, as cautious optimism over a Brexit trade deal with the European Union subsided.

Oil prices extended Tuesday's $2 surge, with Brent futures close to $80 a barrel as Hurricane Florence advanced and U.S. sanctions started weighing on Iran's exports.

Stocks struggle near three-week lows but no respite for emerging markets

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Kevin Ryan
Kevin Ryan Sep 11, 2018 11:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
US and China ‘aim to solve trade war by time Donald Trump and Xi Jinping meet at G20 in November’
0 0
Kevin Ryan
Kevin Ryan Sep 11, 2018 11:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
‪Our stock markets are resilient and strong. All dips have been bought. NAFTA deal will be announced shortly. A China trade deal will also be announced soon after. Technology and banking stocks will rise the most. Bond yields rising is a positive for banks like Citigroup (C)‬
0 0
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email