Stocks Slide Anew With Trade-Talk Outlook `Hazy': Markets Wrap - Ester Holdings

Stocks Slide Anew With Trade-Talk Outlook `Hazy’: Markets Wrap

Bloomberg.com — Monday’s relief rally looked like a one-day wonder on Tuesday as stocks slid in the wake of confusing signals over U.S.-China trade talks. The yen advanced and Treasury yields dropped.

Stocks fell in Japan, Korea and Australia and fluctuated in China after media appearances Monday with Trump administration officials shed little light on the specifics of how Sino-American trade negotiations will progress. European and U.S. futures dropped amid fading cheer about the suspension of new tariffs, and the dollar declined against all major peers. The inversion of portions of the Treasury yield curve for the first time since 2007 reinforced the impression that markets are approaching the end of the current cycle.

U.S. Treasury Secretary Steven Mnuchin and President Donald Trump’s top economic adviser, Larry Kudlow, dialed back expectations and added qualifiers when asked about the weekend agreement between Trump and Chinese President Xi Jinping. China has said nothing about the commitment to remove car tariffs flagged by the U.S., nor did its statement mention the 90-day timeline for talks the Americans have specified.

“We have to see what this next three-month period actually brings,” said Dwyfor Evans, head of Asia-Pacific macro strategy at State Street Global Markets in Hong Kong. “It’s all a little bit hazy at the moment.”

In the Treasury market, three-year yields have climbed above five-year ones, foreshadowing the end of Federal Reserve’s tightening campaign. While the more closely watched part of the Treasury yield curve — the gap between two-year and 10-year yields — remains upwardly sloped, it is only around 15 basis points. With yield-curve inversions having been a reliable indicator of past recessions, the move casts a shadow over the outlook for 2019.

One asset continuing to find support, however, is oil, which advanced for a second day in the wake of moves by producers to address a supply glut that contributed to a 15 percent tumble in West Texas Intermediate prices last month.

Some have read the weakness in oil as a signal on demand conditions, however.

“Despite all this noise with OPEC and so forth I personally think that oil could go to $40,” said Michael Preiss, an executive director at Taurus Wealth Advisors. “This sharp sell-off in oil is actually something in my mind an indication — a reconfirmation rather — of what the yield curve is increasingly telling us” about a looming economic slowdown, he said.

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