Stocks, Metals Decline Amid Trade War Escalation

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(July 12): Stocks fell, the dollar gained and commodities slid as markets reeled from fresh salvos in the escalating trade war between the U.S. and China.

The S&P 500 Index ended the longest rally in a month after the Trump administration said it will slap tariffs on an additional $200 billion of Chinese products. The Asian nation vowed to retaliate. Metals bore the brunt of the reaction in commodities: Copper, nickel and zinc all tumbled.

Trade-sensitive shares in the U.S. led declines, with Caterpillar Inc. and Boeing Co. slumping along with Freeport-McMoRan Inc. and Deere & Co. Emerging-market equities fell more than 1 percent to halt a three-day climb. Crude slipped to $72 a barrel in New York.

The dollar rose by the most in more than a week, while 10-year Treasury yields edged higher after U.S. wholesale prices rose in June from a year ago by the most in more than six years.

Follow our live blog as China responds to latest tariff threats.

“With tariff news moving once again to the front burner, market reaction abroad last night and early this morning underscores global market uncertainty as to the impacts of tariffs on economics and corporate profitability,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co., said. “It also highlights clearly that short-term market movements, at the index level, are driven more so by headlines.”

The newest salvo in the trade war shattered the momentary calm in the markets that had allowed investors to turn their focus to earnings and growth in the economy and sent the S&P 500 to the highest close since February. Investors continue to be caught in a push and pull between corporate results, which begin to pile in this week, and the growing specter of the trade war.

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some events to look out for this week:

Earnings season gets into gear with JPMorgan Chase & Co. and Citigroup Inc. among the largest companies due to give results, as well as India’s Infosys Ltd. The most noteworthy U.S. data may be the June inflation report on Thursday, which consensus expects will show both headline and core price growth picking up. There’s another deluge of Treasury debt sales too, with a total $156 billion of notes and bills offered during the week. Chinese trade data due at the end of the week will probably show slightly slower export growth, after early indicators pointed to softer overseas demand and weaker export orders, Bloomberg Economics said.

And here are the main market moves:

Stocks

The S&P 500 Index sank 0.6 percent as of 1 p.m. New York time, its biggest drop in two weeks. The Dow Jones Industrial Index declined 0.7 percent, the largest decline since the end of June. The Stoxx Europe 600 Index fell 1.3 percent, the biggest tumble in more than two weeks. The Topix Index declined 0.8 percent to 1,701.88. Hong Kong’s Hang Seng Index fell 1.1 percent, the largest fall in more than a week.

Currencies

The Bloomberg Dollar Spot Index gained 0.5 percent. The Japanese yen dropped 0.8 percent to 111.93 per dollar. The offshore yuan rose 0.1 percent to 6.7074 per dollar. The euro fell 0.4 percent at $1.1698.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.86 percent.

Commodities

West Texas Intermediate crude fell 2.7 percent to $72.09 a barrel. Gold declined 0.8 percent to $1,245.33 an ounce. - Bloomberg