Dow suffers biggest fall since January as trade war fears mount - as it happened
Trade war fears send the Dow Jones down by over 500 points, as London stock market hits one-month low
- Latest: New York close
- FTSE and Wall Street in the red
- EC downgrades growth forecasts
- Christine Lagarde warns global growth at risk
- China-US talks WILL take place this week
9.37pm BST
Trade war fears are particularly toxic for industrial and technology stocks.
Boeing ended the day down 3.8%, United Technologies lost 3.4%, Apple fell by 2.7% and Home Depot dropped by 2.4%.
Technology and industrial stocks, which do a lot of business with China and would stand to suffer greatly in a protracted trade war, led the way lower on Tuesday.
9.08pm BST
Wall Street did attempt a late rally, but as the closing bell rings out we're looking at some chunky losses.
The Dow ended the day down 473 points, of almost 1.8%, dragged down by trade war anxiety. That's its biggest one-day drop since 3rd January, according to Reuters.
AT THE CLOSE:
- Dow down 1.78%
- Nasdaq down 1.96%
- S&P down 1.65%
- Where do we head from here? We're turning our attention to earnings from $LYFT and #StockoftheDay $EA pic.twitter.com/XXZ8B6KtMr
#NASDAQ closes almost 2% lower, S&P 500 Index down 1.7%, as #trade jitters send stocks lower. #China trade delegation scheduled to arrive in US tomorrow. pic.twitter.com/oHl8XyKgP0
9.01pm BST
Jason Brooks of KCBS Radio suspects the White House may try to talk the markets round tomorrow...
Yikes...#DOW -639, in line for one of the 20th biggest drops ever, although the 2.5% decline doesn't even sniff the top 20 for single day percentage drops. Still....not pretty. We'll see if the WH trots out #Mnuchin tomorrow to talks up trade hopes.
8.55pm BST
Wall Street is running out of time for a late recovery.....
U.S. equities now climbing a bit from the day's low: pic.twitter.com/Cd4tWdTQT0
8.53pm BST
Ouch! The Dow is touching new lows, now down 641 points (-2.4%) at 25,796.
8.42pm BST
CNN's Anneken Tappe says the Dow is having a "terrible day" - and it's hard to argue.
She writes:
It's down some 600 points, falling below 26,000 points - its worst day since January 3, when Apple warned it would miss its earnings forecast because of weak iPhone sales in China.
The S&P 500 (SPX) is down 2.1% and the Nasdaq (COMP) is looking at a 2.4% loss, having fallen below 8,000 points for the first time since April 18.
Here's why the Dow Jones dropped 600 points today @CNN https://t.co/Ax4xSQ4mbN
8.21pm BST
Here's the situation on Wall Street:
8.18pm BST
A falling tide drags down all boats.
Each of the 30 stocks on the Dow is in the red as the final hour of trading rumbles on. Verizon is the 'top mover', only down 0.75%, while Boeing is the worst-performing stock, down over 4%.
There's only around 25 stocks in the S&P 500 higher today, with not a single Dow stock in the green. Here's a snapshot of what's working: https://t.co/kUuwYk2P3q pic.twitter.com/QquNvhq04q
7.54pm BST
It's looking like a tense day on the New York Stock Exchange.....
7.53pm BST
A handy explanation of what's going on:
Related: Why did Trump threaten to raise China tariffs - and what now?
7.52pm BST
Yikes! The Dow is now down 600 points, with just over an hour's trading to go.
That's a plunge of over 2% today, as traders show mounting concern over the trade war situation.
6.56pm BST
Marketwatch have a good reminder of why trade tensions at soaring, for anyone trying to catch up with today's drama:
U.S. Trade Representative Robert Lighthizer said Monday that the Trump administration will increase tariffs on $200 billion in Chinese goods early Friday. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, rattling investors who had anticipated that better progress toward a near-term resolution between the two superpowers.
In a briefing, Treasury Secretary Steven Mnuchin, along with Lighthizer, told reporters that the U.S. administration was made aware over the weekend that China was trying to back away from "some of the language" that had been hammered out in prior talks.
6.40pm BST
US consumers and Chinese factories would both suffer if Donald Trump delivers on his threat to impose tariffs on all imports from China.
As this chart shows, toys, clothing and footwear would all be affected (and remember, it's the importers who pay the tariff).
President Trump tweeted he would "shortly" impose 25% tariffs on the rest of US imports from China not yet targeted with Section 301 tariffs. This would mostly hit final consumer products, such as toys, footwear, clothing, and electronics. #PIIECharts https://t.co/FEUFyE0rqH pic.twitter.com/WYfYga4zYC
6.31pm BST
Hold onto your hats! The Dow is now down 542 points, or 2%, at 25,896, as the rout intensifies.
It's like the markets are on a time delay. They are finally realizing tariffs are going up to 25% on Friday.
6.22pm BST
The old City saying "Sell in May and go away" could prove prescient this year.
It's only taken a handful of trading days to wipe out April's gains, which led Wall Street to several record highs.
6.18pm BST
The Dow Jones industrial average has now fallen though the 26,000 point mark, on track for its lowest close in a month.
The Dow is down 463 points, or 1.75%, at 25,975 as New York traders try to cram in a quick lunch.
4.52pm BST
Newsflash: Britain's stock market has closed at a five-week low.
The FSTE 100 has ended the day down 120 points, or 1.6%, at 7,260 points. That's the lowest level since the end of March, and the biggest one-day fall since 22 March.
Stocks hit fresh session lows; Dow off more than 420 points https://t.co/HAi4eL6PlP pic.twitter.com/sYUagCLbBg
4.28pm BST
Donald Trump and the European Commission have combined to drive European stocks down today, says David Madden of CMC Markets.
He writes:
Stock markets in Europe have suffered severe declines as US-China trade tensions have heightened. The US already imposes a 10% levy on $200 billion worth of Chinese imports, and there is a fear it will be raised to 25% later this week, and the US has also threatened to impose tariffs on $325 billion worth of Chinese imports. The announcement has rocked investment sentiment, and has prompted traders to dump stocks.
To make matters worse for investors, the EU have lowered their growth outlook for the eurozone, and it now expects 2019 growth to be 1.2%, and the previous forecast was 1.3% ,and the growth forecast for 2020 has been lowered to 1.5% from 1.6%. The timing of the EU's announcement isn't great, but global trade tensions are likely to hurt the region.
4.22pm BST
There's no sign of a turnaround on Wall Street yet.
The Dow is now down 394 points, or 1.5%, at 26,044, threatening to fall through yesterday's low points.
4.09pm BST
Trump's threat to hike the tariffs on imports from China has brought volatility roaring back into the markets this week.
The VIX index (commonly known as the fear gauge) has jumped to its highest level since the end of January.
Looking for an excuse to take profit? Try a Google search #vix #stocks pic.twitter.com/AUjn3jU39k
3.50pm BST
European stock markets are now in retreat, after today's growth downgrades dampened the mood.
The German DAX and French CAC are both down around 1.4%, as electronic red ink runs across the bourses again.
A couple of unpleasant revisions to the EU's economic forecasts only added to the Tuesday's sense of unease, the markets crumbling under the renewed trade tensions.
3.19pm BST
Manufacturing and technology stocks are leading the sell-off in New York.
Boeing has lost 2%, followed by Microsoft (-1.8%) , Apple and Intel (both down 1.6%) and Pfizer (down 1.5%).
2.58pm BST
Ouch! Losses are deepening on both sides of the Atlantic.
In New York, the Dow has just fallen by 300 points - or over 1%.
2.57pm BST
Donald Trump's threat, on Sunday, to hike Chinese tariffs from 10% to 25% - and possibly apply them to all China's imports - has come as a nasty shock to some investors.
For months, a consensus has been building that China and America would eventually reach a deal, following regular 'productive, constructive' meetings.
"With a shock announcement from Trump over the weekend on US China trade negotiations it's a sobering demonstration of why investors should seek a balance between diversification and correlation in their portfolios. Data from the US on Friday on GDP growth and the FED taking a step back from tightening this year has boosted investors' confidence, but threats remain.
Stakes are high in negotiations and if the market senses both sides getting more entrenched conditions for investors could get more testing from here.
2.42pm BST
Every section of the S&P 500 is in the red in early trading, as Wall Street starts Tuesday on the back foot.
But it's early days... yesterday the Dow shed 450 points at one point, before clawing most of them back by the closing bell.
2.37pm BST
Newsflash: Shares are dropping at the start of trading on Wall Street, as trade war anxiety bites.
2.24pm BST
Today's growth forecasts also tee up at a new looming clash between the European Commission and Italy.
The EC predicts that Italy's government deficit will rise to 2.5% of GDP this year, meaning it would mis the 2% target agreed with Brussels (after a fight) last year.
In particular, weak labour market developments are expected to substantially curb revenues from direct taxes. The latter are also lowered by the deferred impact of past tax measures...
Government spending is set to increase significantly following the introduction of the citizenship income and several provisions on pensions, including a new early retirement scheme. Some savings are expected from a new spending review. These projections also assume a cut in government spending of around 0.1% of GDP legislated as a budgetary safeguard clause in 2019.
1.55pm BST
Italy, Germany and Belgium are expected to be the weakest-growing members of the EU this year, with the UK and France skipping (a little) further ahead.
Growth spring 2019 #ECForecast (%):
5.5
4.2
3.8
3.8
3.7
3.3
3.3
3.1
3.1
3.1
2.8
2.7
2.6
2.6
2.5
2.2
2.1
1.7
1.7
1.6
1.6
1.5
1.4
1.4
1.3
1.3
1.2
0.5
0.1
Learn more a' https://t.co/N2vTLdf6bg
1.50pm BST
Despite the looming threat of Brexit, the EC has produced new growth forecasts for the UK.
It predicts that the UK will grow by 1.3% this year -- a little faster than the eurozone's 1.2%, and much better than Germany's measly 0.5%.
UK GDP growth slowed markedly in 2018 and is forecast to remain subdued over the forecast horizon. Private consumption growth should find support from modest real wage growth but continuing uncertainty about the UK's future relationship with the EU27 means that business investment is likely to remain weak. With external demand moderating, net trade is not expected to contribute positively to GDP growth.
Employment growth is expected to slow, leading to a broadly stable unemployment rate. Inflation should ease in 2019 before increasing slightly in 2020.
1.35pm BST
The cuts to Germany's growth forecasts are particularly savage, as Bloomberg explains:
Most of the downgrades were less severe than in the previous report in February, apart from Germany, where the 2019 prediction was slashed to just 0.5 percent from 1.1 percent. Officials in Brussels warned that downside risks to the region's outlook remain "prominent."
The forecasts reflect more pronounced weakness in the region, which has stumbled due to a slowdown in the global economy, unresolved trade disputes and "exceptional weakness" in manufacturing. Meanwhile sentiment has taken a hit from disruptions in the auto industry, social unrest, and uncertainty related to Brexit.
EU slashes its outlook for German growth , sees 'pronounced' euro-area risks https://t.co/XKkDns5mH7 via @v_dendrinou #tictocnews pic.twitter.com/TNFyKbPWlB
1.30pm BST
The EC has slashed its growth forecasts for two of its largest members, Italy and Germany.
Today's economic report predicts that German GDP to only expand by 0.5% this year, down from 1.1% forecast three months ago.
This downturn was most pronounced in manufacturing and related services. Environmental certification delays and mounting stocks led to a standstill in car production and sales in the third quarter, which resumed only gradually in the fourth.
The pharmaceutical industry also had a setback in the fourth quarter due to a shortage of inputs, partly caused by the low level of the Rhine. The situation was compounded by weak exports, stemming from faltering EU and global demand. Import growth remained stronger, in line with sound domestic demand, causing net exports to subtract from growth.
1.17pm BST
Newsflash: The European Commission has cut its growth forecast for the eurozone, and warned that trade disputes have hurt economic growth.
The EC now expects eurozone GDP to only rise by 1.2% in 2019, down from 1.3% previously. For 2020, it expects growth of 1.5%, down from 1.6%.
Economic activity in the EU slowed further in the second half of 2018 as growth in the global economy and trade weakened amid tightened global financing conditions, unresolved trade tensions, high uncertainty, and as a result of exceptional weakness in the manufacturing sector that extended into the start of 2019.
The slowdown was even more pronounced in the euro area as the region is not only highly dependent on external demand, but has also been hit by a number of sector- and country-specific factors, mainly in its largest economy, that have weighed on sentiment as well as on trade between euro area partners. These include disruptions in the car manufacturing sector, social tensions, policy uncertainty, as well as uncertainty related to Brexit.
The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we're not going to be doing that anymore!
1.02pm BST
Trade war anxiety has dragged India's main stock index, the Sensex, down 0.8% today to a five-week low.
12.53pm BST
It's not been a great morning in Europe's stock markets, with most continental bourses adding to Monday's losses.
12.43pm BST
US commodity prices are dropping in early trading in Chicago.
Futures contracts in soybeans, corn and wheat are all under pressure, as traders gloomily conclude that China and the US may not lift tariffs on each other's exports soon.
It's been a horrible mess in grains. #wheat #corn #soybeans pic.twitter.com/aAnDnQVlkV
12.29pm BST
European stock markets are also being dragged down by some weak industrial data from Germany.
Germany factory orders only rose by 0.6% in March, weaker than the 1.5% increase which economists expected.
One bright spot in this otherwise weak-ish German new orders report: demand from euro area countries jumped by 8.6% in March. pic.twitter.com/hQC9vGIZig
11.52am BST
Today's losses have dragged the FTSE 100 down to a one-month low:
"President Trump's threat to increase tariffs on Chinese imports is denting market sentiment and creating unnecessary volatility especially in equity markets.
Investors had been hopeful of a constructive outcome to the US-China trade talks but a worst-case scenario of a collapse in the talks could totally undermine hopes of a recovery in world trade and global economic growth"
11.18am BST
The selloff is gathering pace, as anxiety over the US-China trade dispute bubbles away.
Britain's FTSE 100 is now down 70 points, or nearly 1%, at 7,320, as London traders play catch-up after yesterday's holiday. This could be its worst day in over a month.
After the last set of US-China trade negotiations in Beijing, comments from both sides were muted about progress but on Monday the US threatened to increase trade tariffs of Chinese again because the Chinese side seems to be backtracking on some of the agreements made during the talks. The increase from 10% to 20% would affect $200 billion worth of goods and could kick in as soon as this Friday unless the Chinese delegation arriving in Washington on Thursday manages to appease the US negotiators.
The US-China one-step-forward-two-step-back hurt US markets late Monday and extended into Asian and European trading. The DAX initially held up helped by data showing that German manufacturing orders picked up in March but it eventually crumbled because German exporters are highly sensitive to the stability of the Chinese market, one of their top export destinations.
10.38am BST
Back in the UK, car sales have fallen again as private buyers shun the market.
The SMMT, which represents care manufacturers and salespeople, reports that new registrations shrunk by 4.1% in April to 161,064 cars -- the second worst reading for any April since 2012.
The UK new car market declined by -4.1% in April. The month saw 161,064 units registered, the second lowest April volume since 2012 but following a double-digit increase the previous year. https://t.co/k9j9L5Iiid pic.twitter.com/TCvxorosFx
10.27am BST
Christine Lagarde also warned that Donald Trump's threat to hike Chinese tariffs are an 'unfavourable' development, just when the trade war appeared to be cooling.
We thought this threat was waning and relations were improving and we were moving toward an agreement.
We hope that is still the case but today rumors, tweets and comments are not very favourable."
9.40am BST
The head of the International Monetary Fund has just weighed in, urging Beijing and Washington to cool their trade war.
Speaking at a finance conference in Paris, Christine Lagarde told reporters that the world economy would suffer from further escalation.
"For us at the IMF, it's imperative that trade tensions are resolved in a way satisfying for everyone because clearly tensions between the United States and China are the threat to the global economy,".
Attaining the #SDGs is imperative but low-income countries need to spend about US$0.5 trillion in 2030
How can this be financed sustainably? Raising revenue, improving spending efficiency, reducing corruption & int'l community support @Lagarde #ParisForum https://t.co/T1TLmwpwF3 pic.twitter.com/1Dhy5ZEoJe
"We want the negotiations to stick to the principals of transparency and multilateralism.
"I really urge everybody to avoid decisions that would threaten and jeopardise world growth in the coming months."
9.25am BST
America's chemicals industry has warned that hiking the tariffs on Chinese chemicals from 10% to 25% would hurt the US economy.
China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to U.S. manufacturing. China is also the third-largest export market for U.S. chemicals manufacturers. Future growth for our industry depends on a strong trading relationship with China and a trade policy that creates certainty and predictability for investors - not a looming threat of more or higher tariffs.
"We are starting to see signs that the tariffs are disrupting supply chains, cutting off markets, and eroding U.S. chemical manufacturing competitiveness. Although chemical imports from China grew by 22.7 percent in 2018, the retaliatory tariffs significantly dampened U.S. chemical exports to China, resulting in only a 2.7 percent increase in 2018 - nearly tripling the chemicals trade deficit, from $1.4 billion to $4.0 billion.
9.06am BST
Just in: The Chinese government has warned Washington that simply imposing more tariffs won't fix their trade dispute.
Reuters has the details:
Tariffs won't resolve any problems in the ongoing bilateral trade dispute between China and the United States, China's foreign ministry said on Tuesday.
Foreign ministry spokesman Geng Shuang, speaking at a daily press briefing, said China hopes that the United States will work with China to resolve each other's concerns.
8.57am BST
Nickel has hit a three-month low this morning, on concerns that trade tensions will hit demand for commodities.
Nickel contracts at the London Metal Exchange fell 0.8% to $12,080 per tonne, the lowest since late January.
8.52am BST
Deutsche Bank analysts reckon Beijing is unlikely to back down, despite Trump's threat to impose steeper tariffs on their sales to America.
They points out that:
China says Vice Premier Liu He to visit U.S. from May 9 to May 10 for trade talks$SPY $SPX $ES_F pic.twitter.com/fWbQrnzVzl
8.37am BST
Chinese stocks stabilized on Tue after a massive sell-off on Mon.
Indexes were lifted by news that Chinese vice premier Liu He will visit the US for trade talks this week. #Shanghai Composite closed 0.7% higher at 2926, after falling below 2900 mark intraday. pic.twitter.com/UmvlRPwY9q
8.34am BST
The Chinese yuan is strengthening a little, on relief that vice-premier Liu He is still packing his bags for a trip to Washington this week.
After slumping to a three-month low of 6.8 yuan to the US dollar on Monday, the currency has recovered to 6.76 today.
Please tell me under what circumstances China sending Liu to Washington is a sign of strength after the Trump Tweets. This is China either admitting they screwed up or that they are desperate for a deal. https://t.co/ygNRH1Y3LX
8.23am BST
European stock markets are trying to revive themselves after Monday's sell-off, but it's slow going.
The Italian FTSE MIB has jumped 0.5%, Spain's IBEX is up 0.3%, but Germany's DAX is only 0.1% higher.
There is a sense that the US is working extremely hard to extract last-minute concessions from China ahead of a planned visit by vice-premier Liu He. That visit has been confirmed - he is to visit the US May 9th-10th.
Will that be enough to avert the tariffs being raised on Friday is unclear, but at least it means the two sides are continuing to talk and a deal is still possible. However, we don't know if this is a last-ditch rescue mission to save talks or something that moves talks on in a more substantive way.
8.17am BST
Britain's FTSE 100 has shed 0.3%, or 24 points, at the start of trading.
After yesterday's Bank Holiday, City traders are catching up with the latest trade war action.
8.11am BST
China's stock market is staging a late mini-rally, on relief that trade talks will resume in Washington on Thursday.
The CSI 300 index has jumped 1% today, clawing back some of its worst losses since February 2016 yesterday (when it lost 6%).
7.54am BST
Newsflash: Beijing has announced that vice-president Liu He is planning to visit Washington later this week for trade talks.
China's commerce ministry says Liu will hold trade negotiations on May 9th and 10th (Thursday and Friday).
NEW: Chinese Vice Premier Liu He will visit the U.S. for trade talks May 9-10, China's MOFCOM says. The decision to send him comes after USTR Lighthizer and Treasury Sec. Mnuchin yesterday faulted Beijing's negotiating tactics and said plans to raise tariffs on Friday are firm.
That VP Liu will visit the US for trade talks this week is a faintly moderately positive sign for US-China trade talks-tho his not attending would also have nixed any deal hopes. But risk of hardening of China's position remains, esp if US tariff threat materialises. #tradewar
7.41am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Related: Trump escalates trade war with China with plan to raise tariffs
"Over the course of the last week or so we have seen an erosion in commitments by China. That in our view is unacceptable."
Those two tweets from President Donald Trump that rocked markets on Monday weren't just bluster: The top U.S. trade negotiator confirmed the U.S. plans to hike tariffs on Chinese goods this week, accusing China of backpedaling on commitments made during the talks.
Related: Markets slide after Trump threatens to dramatically increase China tariffs
We have long believed that the trade war is more than about trade, it is about technology. And during the last couple of months, the US has urged its Western allies not to use China's 5G products as the US believes that there is a security concern.
The development of the trade negotiation process should be long as China learns about the US negotiation tactics, and has a back-up from a policy-stimulated economy. Technology should be the focus of the renegotiations.
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