Global economic data take backseat as White House volatility rules

US Treasury Secretary Steven Mnuchin downplays fallout from outbreak of US-China trade war. 

The Easter slowdown in world economic data over the next two weeks will give little respite to investors battered by political events.

Stocks on Wall Street lost the most in more than two years last week, fuelled by the first shots in a global trade war, rising interest rates and volatility in White House staffing and policy-making.

Other developments in an action-packed week included a meltdown at Facebook over data security, a slump in high-tech shares and fears all these events will disrupt growth in the world economy.

The Dow Jones Industrial Average fell more than 1400 points over five days, a 5.7% decline that marked the blue-chip index’s biggest weekly percentage loss since January 2016. 

The Dow slid 424.69 points, or 1.8%, to 23,533.20 on Friday, deepening its declines for the year and closing at its lowest level since November. The S&P 500 fell 2.1% to 2588.26 and the Nasdaq Composite shed 2.4%, to 6992.67.

Stocks elsewhere around the world fell broadly, with benchmark indexes in Europe, Japan, Shanghai and Hong Kong each losing more than 3% for the week.

“There’s multiple things going on, and none of it good,” says Larry Peruzzi, managing director of international equity trading at Mischler Financial.

“Six months ago, everything was good and you couldn’t find a reason to sell stocks. Now you can’t find a reason to hold them.”

Big weekly losses
Shares of manufacturers, steelmakers and aluminium producers logged steep weekly losses. Century Aluminum fell 20%, US Steel  lost 15% and Caterpillar dropped 7.8%.

This follows decisions by the Trump administration to impose tariffs on tens of billions of dollars of Chinese imports on top of levying duties on steel and aluminium imports – raising fears that tighter trade policies could dull economic growth.

China’s commerce ministry responded by announcing it would levy tariffs against $US3 billion worth of US goods, including pork and recycled aluminium.

“The market is so fixated on the potential effects of tariffs that it’s overshadowing anything else that’s occurring,” says Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co.

In weekend interviews, Treasury Secretary Steve Mnuchin downplayed the China trade actions, saying they won’t have a “big impact on the economy, ” while US executives at the China Development Forum in Beijing over the weekend said talks w/the Chinese government in have been positive. 

Bank shares slid as US Treasury bonds, which have rallied on the tariff news, strengthened for a second straight week. The yield on the 10-year note settled at 2.826% on Friday, compared with 2.832% on Thursday and 2.848% a week earlier.

Facebook tumbles 14%
Facebook shares tumbled again on Friday, posting a 14% weekly decline – its biggest since 2012. Other technology names slipped, with Twitter, Apple and Google parent Alphabet each losing more than 7% for the week.

As global stocks tumbled, assets that tend to rise with market uncertainty got a bump.

Gold contracts for March delivery jumped 2.9% to $US1349.30 a troy ounce for the week, settling at their highest level in more than a month.

The Japanese yen, which tends to rise in times of market stress, hit its highest level against the US dollar since November 7, 2016, a day before the US presidential election.

The economic calendar is pretty empty for nearly the next two weeks. 

In the US, the Feb personal consumption expenditure (PCE) hits on Thursday but investors aren’t particularly nervous about this number.  

The next major event will probably be the March US jobs report but that isn’t until April 6 after the Easter break.

Markets in the Americas and Europe will be closed on Good Friday and most again on Monday, April 2.

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