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10-year Treasury yield falls to 2.9% as stocks extend sell-off
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Arrest of Huawei CFO in Canada may cloud China trade talks
U.S. equity futures tumbled at the Asia open, sending a shock wave through stock markets and setting the tone for Thursday trading. European and Asian shares slumped while Treasuries advanced and the dollar edged higher.
While contracts on the S&P 500 pared some of their decline — selling pressure had at one point forced intermittent pauses in trading — the mood was set and the MSCI Asia Pacific Index deepened losses through the day. The Stoxx Europe 600 Index tracked the move, extending its decline a third day to the lowest since December 2016. Most European bonds gained.
The precise catalyst for the futures sell-off was unclear, but Hong Kong shares slid 2.5 percent after the arrest of the chief financial officer of tech giant Huawei Technologies Co. — a move which threatens to reignite U.S.-China tensions. The yuan dropped the most since October.
Whether or not it triggered the slide, Canada’s arrest of Huawei’s CFO and reports it may extradite her to the U.S. are a blow to already fragile sentiment, just days after an apparent breakthrough on trade between America and China.
“This move against the Huawei CFO has just added another spanner in the works,” Eleanor Creagh, strategist at Saxo Capital Markets, told Bloomberg TV in Sydney. “It’s really illustrative of the fact that the trade truce we saw over the weekend between Trump and Xi doesn’t really do much to mend the underlying relationship between the U.S. and China that is still deteriorating.”
Elsewhere, Bank of Japan Governor Haruhiko Kuroda said economic risks from abroad could be severe, and the Federal Reserve’s Beige Book report showed fading optimism over growth prospects at U.S. firms even as most districts continued to report a modest expansion. Oil in New York fell below $52 per barrel as core OPEC members gather in Vienna to thrash out production cuts.
The pound drifted as U.K. Prime Minister Theresa May searched for a compromise to avoid a crushing defeat on her Brexit deal in a key vote in Parliament next week.
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Some of the key events investors will be focused on this week:
- OPEC ministers meet in Vienna Thursday.
- Friday brings the U.S. monthly employment report for November.
- China November trade data are due on Saturday.
And here are the main moves in markets:
Stocks
- Futures on the S&P 500 Index fell 1.3 percent as of 9:35 a.m. London time, the lowest in almost two weeks.
- The Stoxx Europe 600 Index sank 1.8 percent to the lowest in two years on the biggest tumble in eight weeks.
- The U.K.’s FTSE 100 Index sank 1.9 percent to the lowest in two years on the largest tumble in eight weeks.
- Germany’s DAX Index dipped 2.1 percent to the lowest in two years on the biggest decrease in more than six weeks.
- The MSCI Asia Pacific Index declined 1.8 percent to the lowest in almost two weeks on the largest drop in six weeks.
- The MSCI Emerging Market Index dipped 2.1 percent to the lowest in more than a week on the biggest decrease in more than six weeks.
Currencies
- The Bloomberg Dollar Spot Index increased 0.1 percent to the highest in more than a week.
- The euro was unchanged at $1.1344.
- The British pound climbed less than 0.05 percent to $1.2739.
- The Japanese yen gained 0.4 percent to 112.71 per dollar, the strongest in more than two weeks.
Bonds
- The yield on 10-year Treasuries fell one basis point to 2.90 percent, hitting the lowest in three months with its sixth straight decline.
- Germany’s 10-year yield decreased two basis points to 0.26 percent, the lowest in more than 17 months.
- Britain’s 10-year yield dipped two basis points to 1.293 percent.
- The spread of Italy’s 10-year bonds over Germany’s rose three basis points to 2.8177 percentage points.
Commodities
- West Texas Intermediate crude fell 1.5 percent to $52.12 a barrel, the largest fall in more than a week.
- Gold fell less than 0.05 percent to $1,237.18 an ounce.
By Samuel Potter – December 6, 2018, 8:42 PM GMT+11
— With assistance by Adam Haigh