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Stocks Stabilize as U.S.-China Trade War Enters New Stage Stocks Stabilize as U.S.-China Trade War Enters New Stage
(about 2 hours later)
Financial markets showed signs of stabilizing on Tuesday, a day after China’s announcement of retaliatory tariffs on imports from the United States touched off Wall Street’s biggest loss in more than four months.Financial markets showed signs of stabilizing on Tuesday, a day after China’s announcement of retaliatory tariffs on imports from the United States touched off Wall Street’s biggest loss in more than four months.
The S&P 500 rose modestly at the start of trading in New York, after European benchmarks recorded similar gains. Asian markets fell slightly. Investors are trying to adjust to the ratcheting up of trade tension between the United States and China, and determine the impact of the continuing dispute on the global economy, corporate profits and consumer spending. The rising tension is an abrupt change for traders who, as recently as last month, were anticipating that the two sides were close to reaching a deal.
The American stock benchmark rebounded off its steepest loss since early January, a drop that reflected the realization that the trade war between the United States and China is not likely to end anytime soon. On Monday, the S&P 500 suffered its steepest drop since early January, after Beijing said it would raise tariffs on American-made goods in retaliation for a similar move from the United States.
[Read more about the reasons investors have been rattled by the return of trade tension.][Read more about the reasons investors have been rattled by the return of trade tension.]
Beijing announced plans on Monday to raise tariffs on nearly $60 billion a year of American-made goods, a move that followed the United States’ imposition of tariffs on $200 billion a year of imports from China. The dueling tariff increases will not hit the global economy right away, as they will not come into full force for several weeks. President Trump said on Monday that he would meet with his Chinese counterpart, Xi Jinping, next month in Japan. Stocks on Tuesday rebounded from that plunge. The S&P was up in late morning trading, while European benchmarks were modestly higher. Asian markets ended the day slightly down.
Still, public comments from Beijing Tuesday suggested that the uncertainty for investors was far from over. The recovery on Wall Street was broad, with energy companies, semiconductor makers and other tech and industrial firms leading the American market higher. Apple, Boeing, Caterpillar and Wynn Resorts, which were all battered by trade-related fears on Monday, also rose.
“China does not want or wish for a trade war, but it is by no means afraid of one,” Geng Shuang, a spokesman for the Chinese Foreign Ministry, said at a daily news briefing. “If someone brings the war to our doorstep, we will fight it to the end,” he added. But there were signs that investors continue to worry about the costs of the prolonging trade fight. Retail stocks were among the worst performers of the day, and Ralph Lauren suffered one of the steepest drops, despite posting better-than-expected quarterly earnings results.
In Europe, France’s CAC 40 was up more than 1 percent by Tuesday afternoon. The Dax in Germany had risen 0.5 percent by the same time. In London, the FTSE 100 climbed 0.9 percent. The Trump administration is now considering whether to expand tariffs on Chinese imports to include consumer products, from shoes to smartphones. Taxes on those products could either hurt consumer spending or retail profits if companies try to absorb the higher import costs.
In a conference call with analysts after the release of the company’s quarterly results, Jane Nielsen, Ralph Lauren’s chief financial officer, said that the company was “taking a more cautious approach to inventories, especially in light of the dynamic trade environment.”
Tuesday’s market recovery came despite little in the way of positive developments on the trade front. Public comments from Beijing suggested that the uncertainty for investors was far from over.
“China does not want or wish for a trade war, but it is by no means afraid of one,” Geng Shuang, a spokesman for the Chinese Foreign Ministry, said at a news briefing. “If someone brings the war to our doorstep, we will fight it to the end,” he added.
Commodities prices, which had also been hit by worsening trade tensions on Monday, recovered in early trading. Soybeans, a key American export to China, rose. Prices for copper, an industrial metal hose prices are considered good gauges of expectations for Chinese economic growth, also climbed. Crude oil prices were higher, after Saudi Arabia said a pipeline had been attacked by an armed drone.
In Europe, France’s CAC 40 was more than 1 percent by Tuesday afternoon. The Dax in Germany had risen 0.5 percent by the same time. In London, the FTSE 100 climbed 0.9 percent.
Hong Kong, which was closed on Monday for a holiday, led the declines in Asia. The Hang Seng Index lost 1.5 percent. In China, the Shanghai Composite Index and the Shenzhen Composite Index both fell 0.7 percent, while Nikkei 225 in Japan dropped 0.6 percent.Hong Kong, which was closed on Monday for a holiday, led the declines in Asia. The Hang Seng Index lost 1.5 percent. In China, the Shanghai Composite Index and the Shenzhen Composite Index both fell 0.7 percent, while Nikkei 225 in Japan dropped 0.6 percent.
South Korea bucked the regional trend, with the Kospi rising 0.14 percent.South Korea bucked the regional trend, with the Kospi rising 0.14 percent.