European stocks slump as US futures pare decline

Cape Town - Stock declines deepened on Friday, with European equities sliding to the lowest in more than a year and gauges tumbling across Asia as the negative news cycle for risk assets continued.

Treasury yields and US equity futures both pared a drop, however, signalling the selloff may yet ease.

China announced retaliation against President Donald Trump’s tariffs and there was further turnover in the US administration, compounding a retreat that started in technology shares and escalated when the White House upped its protectionist agenda on Thursday.

Traditional havens including gold and the yen jumped as investors sought safer assets, though government bonds failed to add to gains from a day earlier.

The Stoxx Europe 600 Index fell for a third day after equity indexes from Tokyo to Shanghai tumbled well over 3%. The euro advanced, adding to headwinds for the region’s exporters.

Treasuries eventually edged lower, and the yen gave up some of its gains after strengthening past 105 per dollar for the first time since November 2016.

It’s been a miserable week for higher-risk markets globally, as a trade war edged closer, the tech sector was roiled by Facebook Inc.’s privacy scandal and data showed European growth sputtering.

Traders had already been bracing for the possibility of slowing expansion as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday’s hike.

"The window from coming back from an all-out trade war is still open, but closing fast, and obviously leaves a lot of uncertainty over the next two to three weeks," said Kay Van-Petersen, a Singapore-based global macro strategist with Saxo Capital Markets.

It is "classic risk-off for equities today and potentially over the next few days."

Adding to the image of the ascendance of the "America first" faction, Trump said he is replacing White House National Security Adviser H.R. McMaster with John Bolton, a controversial foreign-affairs specialist whom the US Senate declined to confirm as President George W. Bush’s ambassador to the United Nations.

Oil prices edged higher amid worries that Bolton would pursue a hard-line stance against Iran.

Here are some key events remaining this week:

Data on US durable-goods orders and new-home sales may provide more clues about the health of the world’s biggest economy. Moody’s Investors Service is set to announce on Friday whether it will leave South Africa’s credit rating at the lowest investment grade level.

And these are the main moves in markets:

Stocks

The Stoxx Europe 600 Index dipped 1.2% as of 7:34 am New York time, the lowest in more than 13 months. Futures on the S&P 500 Index fell 0.3% to the lowest in six weeks.

The UK’s FTSE 100 Index decreased 0.6% to the lowest in more than 15 months. Germany’s DAX Index sank 1.5% and France’s CAC 40 Index declined 1.5%.

The MSCI Asia Pacific Index sank 2.6 percent. Japan’s Topix sank 3.6%, Hong Kong’s Hang Seng decreased 2.6%, South Korea’s Kospi dropped 3.2%, and Australia’s S&P/ASX 200 Index decreased 2%.

Currencies

The Bloomberg Dollar Spot Index decreased 0.1%. The euro increased 0.3% to $1.2337. The British pound advanced 0.1% to $1.4112. The Japanese yen gained 0.3% to 104.97 per dollar, the strongest in more than 16 months.

Bonds

The yield on 10-year Treasuries gained one basis point to 2.83%. Germany’s 10-year yield advanced less than one basis point to 0.53%. Britain’s 10-year yield climbed less than one basis point to 1.44%.

Japan’s 10-year yield fell one basis point to 0.024%, the lowest in more than six months.

Commodities

West Texas Intermediate crude advanced 0.3% to $64.50 a barrel. Gold increased 1% to $1 341.82 an ounce, the highest in more than a month. LME copper decreased 0.5% to $6 662.50 per metric ton, the lowest in 15 weeks.