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Global stocks dive on growth concerns, doubts over trade truce

Reuters  |  NEW YORK 

By Laila Kearney

(Reuters) - Global stocks tumbled on Tuesday as a flattening Treasury curve sparked recession warnings, while optimism sharply waned that the and would quickly resolve their trade dispute.

Benchmark Treasury 10-year fell to its lowest point since mid-September. The spread between the 10-year over its two-year counterpart also shrank to the smallest since the start of the financial crisis in January 2008, signalling to some investors an approaching U.S. economic slowdown.

"Today is the perfect storm," said RJ Grant, at Keefe, in "You've nothing really tangible coming out of the summit. You have worries about growth."

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 2.16 percent, its worst performance since October 11.

The Dow Jones Industrial Average <.DJI> fell 799.36 points, or 3.1 percent, to 25,027.07, the S&P 500 <.SPX> lost 90.31 points, or 3.24 percent, to 2,700.06 and the Nasdaq Composite <.IXIC> dropped 283.09 points, or 3.8 percent, to 7,158.43.

Stock Exchange and Nasdaq will be closed on Wednesday, for a day of mourning for former George H.W. Bush, who died on Friday at the age of 94.

The pan-European STOXX 600 index <.STOXX> lost 0.76 percent.

On Monday, stock markets around the world got some relief after and agreed to temporarily end their trade war during talks at the summit in Upon closer scrutiny, investors said a deal between the world's two biggest economies was far from a sure bet.

"As soon as investors digested the information from the discussions they focused on the uncertainties and lack of details," said Ryan Nauman, market strategist, Financial Intelligence, Zephyr Cove,

There was added confusion over when the 90-day truce period, during which the and would hold off on imposing more tariffs, would start.

Additionally, U.S. on Tuesday warned he would revert to tariffs if the two sides could not resolve their differences.

"If it is, we will get it done," Trump wrote in a post. "But if not remember, I am a Tariff Man."

Meanwhile, the flattening U.S. weighed on investors' minds.

"The focus is now shifting to the inverted U.S. yield curve, which has negative connotations, while implying the U.S. is heading towards what was, only a few weeks ago, an improbable economic slowdown," said Stephen Innes, for APAC at

Comments on Tuesday by about the path of interest rate hikes added to the uncertainty for investors.

Williams said should expect to continue raising interest rates "over the next year or so" even while it pays close attention to possible risks highlighted by financial markets.

The comments came after those from Fed last week, which lifted stocks as they were interpreted as suggesting a less aggressive path of rate hikes.

The dollar, which started the week on a weak footing as the apparent thaw in trade tensions between the U.S. and cooled demand for the safe-haven currency, extended its fall as investors worried about the inversion of the short end of the U.S. in markets.

Sterling briefly drooped to a 17-month low on the day, before recovering ground to trade little-changed, in a volatile session dominated by Brexit-related headlines.

pared some gains as fears flared that demand would stall due to a trade war between the U.S. and China, and that remained a stumbling block to a deal to cut global crude supply. [O/R]

Brent settled at $62.08 per barrel, or jumped up 0.63 percent. U.S. light crude was last up 30 cents at $53.25.

(Additional reporting by Karin Strohecker, Shreyashi Sanyal, Jessica Resnick-Ault, Lewis Krauskopf, and Chuck Mikolajczak; Editing by and Susan Thomas)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, December 05 2018. 03:24 IST