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Abu Dhabi, UAESaturday 22 September 2018

Banks lead US stocks lower amid political and trade worries

All major US benchmarks ended lower in lighter than normal trading

All major US benchmarks ended lower in lighter than normal trading on Friday. Michael Nagle / Bloomberg
All major US benchmarks ended lower in lighter than normal trading on Friday. Michael Nagle / Bloomberg

Stocks fell as weakness in shares of US banks and finance firms added to the political and trade tensions weighing on the market. Treasury yields slid and oil rose for a fifth straight day, reaching its highest level since December 2014.

All major US benchmarks ended lower in lighter than normal trading, with the financial sector pacing losses on a drop of more than 1.5 per cent. Wells Fargo warned that its better than anticipated first-quarter results may change as a settlement with regulators looms, loans dropped and mortgage-banking results trailed predictions. JPMorgan Chase and Citigroup posted quarterly earnings that topped analysts’ expectations, but shares of both companies plunged as JPMorgan chief executive Jamie Dimon said, “the environment is intensely competitive and lending was flat for the quarter.”

“You’re getting a very high expectation for earnings season, which makes me a little bit nervous,” said Tom Essaye, the former Merrill Lynch trader who founded market newsletter ‘The Sevens Report.’ After banks reported results “and it wasn’t another positive catalyst, you just saw people come in and sell the market,” he said.

The market’s focus also is on political turmoil surrounding President Donald Trump, Potential military activity in Syria and trade tensions between the US and China. On Thursday, President Donald Trump expressed optimism on trade deal with China and hinted that the US may rejoin the Trans-Pacific Partnership free-trade deal that he pulled out of shortly after taking office.

“Thus far it’s really all been theater,” Brad McMillan, chief investment officer for Commonwealth Financial Network, said of the trade issues. “Where we might actually start to see it show up in the market again is if companies start talking about the effect of the tariffs on their earnings calls. I think it’s fairly likely that it will at least be mentioned. A lot of companies look for reasons to kind of dial down expectations, and this certainly is a very real one, even though it’s theoretical at the moment.”

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The Stoxx Europe 600 Index rose but retreated from an earlier climb to a six-week high, led by raw-material producers as industrial and precious metals advanced. Aluminum headed for its biggest weekly increase since at least 1987 on concern US sanctions on Russia’s United Rusal will disrupt supplies.

Meanwhile, the dollar declined. Sterling climbed to the strongest level against the euro in almost a year against as investors bet on a Bank of England interest-rate hike next month, after the European Central Bank revealed a dovish slant in the account of its March meeting published Thursday.

The S&P 500 Index fell 0.3 per cent to 2,656.30, while the Dow Jones Industrial Average slid 123 points, or 0.5 per cent. In Europe, the Stoxx Europe 600 gained 0.1 per cent.

Meanwhile, the MSCI All-Country World Index slipped 0.1 per cent, The MSCI Asia Pacific Index climbed 0.1 per cent and the MSCI Emerging Market Index fell 0.6 per cent.

In the currencies market, euro gained 0.1 per cent to $1.2339, the British pound increased 0.1 per cent to $1.4246 while the Japanese yen declined less than 0.1 per cent to 107.37 per dollar.

The yield on 10-year Treasuries fell two basis points to 2.8193 per cent. Germany’s 10-year yield dipped one basis point to 0.511 per cent, while Britain’s 10-year yield dropped two basis points to 1.435 percent.

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