As Tensions with China Escalate, Stock Market Plunges 767 Points

Trader James Coffey works on the floor of the New York Stock Exchange Monday Aug. 5 2019. U.S. stocks nosedived in early trading on Wall Street Monday as China's currency fell sharply and stoked fears that the trade war between the world's

Dow down 767 points today - Newswatch

The Dow Jones Industrial Average closed 2.9 per cent lower at 25,718.

"We're not quite all the way through this mini correction and it could well morph into a 10% correction and wouldn't surprise me", said Doug Cohen, managing director of portfolio management at Athena Capital Advisors. The index had been down 2% during the heaviest bout of selling.

The U.S. has lengthy complained in regards to the weak point of China's foreign money, and Monday's drop introduced the yuan previous a stage that merchants noticed as an necessary psychological benchmark, at seven per $1.

Banks sustained some of the worst losses Wednesday.

The sell-off began Monday in Asia, where indexes lost more than 1%, and intensified as it swept westward through Europe to the Americas.

Longer term, the outlook for markets will depend on how the trade conflict between the United States and China plays out. China struck back on Monday, allowing its currency, the yuan, to weaken against the U.S. dollar. It was above 3% in late November.

Industrial and financial stocks posted the biggest drops early Monday.

"That's a big part of why markets are not down big again today", Kravetz said.

For now, experts say the U.S. economy is still relatively strong, unemployment is at its lowest rate in half a century, and U.S. stocks just reached record highs last month.

"After trade talks broke up later in the day, US officials said they were preparing to expand those tariffs to cover another $300 billion of goods, covering most imports from China", reports Fox News. Unemployment is at the lowest level in decades and consumer confidence remains strong.

But analysts and investors don't see Tuesday's gains as an end to the market's latest stumble, and warn investors to brace for further spikes in volatility. The yield on the two-year note sank to 1.58% from 1.71%. It was 0.36 points earlier in the day, the widest gap since the spring of 2007, less than a year before the Great Recession. Federal-funds futures show traders pricing in a 100 percent probability of another cut in September and a 75 percent chance of another cut in October. A month ago, they projected that probability at less than 9%. That came after the U.S. Treasury Department officially labeled Beijing a currency manipulator, a status that opens the way to possible additional sanctions. More than three-quarters of the S&P 500 have reported financial results. On Wednesday morning, the S&P 500 sat at 2,862.45, up 1 per cent from that early 2018 starting point.

The Shanghai Composite Index fell to 2,749.85 and Tokyo's Nikkei 225 retreated to 20,299.69.

Banks sustained some of the worst losses Wednesday.

Monday's plunge in bond yields dragged on banks by making lending less profitable. Brent crude, the worldwide standard, fell $1.35, or 2.2%, to $60.54.

Bond prices rose sharply. The Nasdaq fell 309 points, or 3.9%, to 7,694. Heating oil declined 5 cents to $1.84 per gallon.

On the flipside, the Australian dollar has risen strongly (+1.3pc) against the devalued Chinese currency, and is buying 4.78 yuan.

The US dollar was steady, while the yen gained and gold rallied toward $1,500 an ounce. The euro weakened to $1.1200 from $1.1202.

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