Business

Things were good for Wall Street. Then the trade war was heated.




Stocks began in 2019 with the tightest start of more than three decades, as the economy grew faster than expected, the federal bank seemed to abandon its plans to continue raising interest rates and war action between Washington and Beijing seemed to end

By 30 April saw S & P 500 reach a record.

So began tweets on trading, and sent markets to a tailspin that ended Friday with S & P 500 down 1.3 percent. The benchmark index ended May at 6.6 percent, the first monthly decline in the year and the worst drop since a nasty sale in late 2018.

The fall on Friday came after President Trump said Washington would impose a new tariff on all imports from Mexico – a tax that can rise to as high as 25 percent – unless the country's government took steps to tackle the migration of immigrants across US borders, and Beijing announced plans to uncover a blacklist of foreign companies and people

The Chinese Department of Commerce did not mention companies on the list or say what would happen to them, but the move is an apparent retaliation against the Trump administration's move to deny US technology to Chinese companies.

In between, the problems seemed to spread throughout the week, with the tariffs increasing, the talks giving no meaningful results, and the threats increasing. Then, the Vita House issued an order that effectively hampered the sale of Huawei, China's leading network company, in a move that extended the trade deficit conflict and against difficult to resolve technological dominance issues.

"I think in some sense, the Huawei ban was a major deal," said Maneesh Deshpande, market strategist at Barclays in New York. "It really opened a new front in the commercial war."

Investors worldwide reacted with pricing in the growing financial cost of the fight Stock markets in trade-dependent economies such as Japan, South Korea and Germany also saw strong losses in May

On Friday, US stocks dropped: Investors dumped industrial and hardware stocks, shares of consumer products and those of giant technology companies.

Businesses with close links to Mexico were in the light of the threat of new tariffs, and large car manufacturers, with complicated supply chains crossing the Mexico-US border, were hit particularly hard by Ford down 2.3 percent and General Motors fell 4.3 percent.

The growing risk of global growth seems somewhat inconsistent with a number of recent reports suggesting significant strength in the US economy. At 3.6 percent, unemployment is at its lowest level since 1969. Wages are growing with a strong cut. And corporate profits remain high. In the recently completed Quarterly Revenue Reporting season, approximately 75 percent of companies report expectations from Wall Street analysts.

But this month, the sound bases have been drowned by the growing volume of trading spit, with investors increasingly fixed on some signs of growth flags.

Government bond markets have sent some of the strongest warning signals. A global decline in long-term interest rates this month, usually seen as a sign of growth threats, has begun to embrace investors across Wall Street.

The continued Friday return on the 10-year Treasury note falls to 2.13 percent, according to Bloomberg, its lowest level since September 2017.

To some extent, the low yields are pricing in rising expectations of that the Federal Reserve will cut interest rates. According to the Fed Funds futures market, sellers make about 90 percent odds on Fed cut rates by the end of the year, up from around 38 percent in mid-April.

Expectations that the Fed is ready to support the financial market – a view that the central bank has never completely approved – have probably disappeared stocks to some extent this month. But it also probably means that investors will be more sensitive to some clues as to whether interest rates will actually materialize in the next few months.

The markets say "there is no inflation and you have policies too tight and you have to start thinking about lowering interest rates," said James Bianco, president of Bianco Research, a financial consulting firm in Chicago. "Now I think Fed & # 39; s hand is a little forced. "



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