(Updates prices, adds comments, changes byline, dateline from
LONDON)
* U.S. President to make EU trade announcement at 1745 GMT
* European stocks drop 2.5%, biggest daily fall in 2019
* Interest rate futures price in Fed rate cut in Sept
* Oil prices rebound from biggest daily drop in years
By Rodrigo Campos
NEW YORK, Aug 2 (Reuters) - A measure of stocks across the
globe was on track to post its largest weekly loss of the year
on Friday while yields in U.S. and German debt were near
multi-year lows, after China vowed to retaliate against a
possible new round of U.S. tariffs.
Oil prices bounced back from over 7% losses the previous
session and the yen scaled further against the dollar after
posting its strongest day in over two years on Thursday.
The moves come on the heels of a sharp Wall Street selloff
triggered by U.S. President Donald Trump's Thursday threat to
impose a 10% tariff on $300 billion worth of Chinese imports
partly due to lack of progress in U.S.-China trade talks.
China did not specify how it would retaliate against the
possible action by the United States, but analysts have said
options include tariffs, a ban on the export of rare earths that
are used in everything from military equipment to consumer
electronics, and penalties against U.S. companies in China.
The trade war between the world's largest economies has
dislocated supply chains globally and slowed economic growth.
The abrupt end to a truce in the trade conflict capped a
critical week for global markets after the U.S. Federal Reserve
delivered a widely anticipated interest rate cut but played down
expectations of many more ahead.
The Dow Jones Industrial Average .DJI fell 216.24 points,
or 0.81%, to 26,367.18, the S&P 500 .SPX lost 27.79 points, or
0.94%, to 2,925.77 and the Nasdaq Composite .IXIC dropped
125.08 points, or 1.54%, to 7,986.04.
The pan-European STOXX 600 index .STOXX lost 2.46% and
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
1.27%.
Emerging market stocks lost 2.11%. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 1.9%
lower, while Japan's Nikkei .N225 lost 2.11%.
EVEN MORE TARIFFS?
News that Trump will make an announcement about trade with
the European Union at 1745 GMT (1245 ET) on Friday did little to
calm markets. Trump last week threatened to tax French wines
after Paris' proposal of a digital services tax.
The trade war escalation alongside Friday data showing U.S.
employment growth in July slowed as expected may make a case for
the Federal Reserve to cut interest rates again in September.
"On balance it is probably a slightly dollar-negative
(employment) number because (it) increases the case for a Fed
rate cut in September. We're already at the point where we're
trading that," said Greg Anderson, global head of foreign
exchange strategy at BMO Capital Markets in New York.
A further 25-basis-point cut by the Fed is all but priced in
for the FOMC's September meeting while the chance of yet another
cut in October is roughly 1-in-2 according to Fed futures
markets.
Safe-haven assets were bid across markets on Friday with
German 10-year government bond yields DE10YT=RR dropping to an
all-time low of -0.502% and the country's entire government bond
yield curve turning negative for the first time ever.
Benchmark 10-year notes US10YT=RR last rose 8/32 in price
to yield 1.864%, from 1.892% late on Thursday. They fell to
1.832% earlier Friday, the lowest since November 2016.
"In the grand scheme of things, it will become clearer and
clearer that the Federal Reserve has started an easing cycle and
will have no choice but to cut rates further," said Akira Takei,
fund manager at Asset Management One.
In currency markets the Japanese yen JPY= , which on
Thursday gained the most in over two years against the dollar,
strengthened 0.70% to 106.62 per dollar.
The Swiss franc reached a two-year high of 1.0909 EURCHF=
against the euro, which bounced back from a two-year low of
$1.1027 hit earlier. The common currency EUR= was recently up
0.25% to $1.1111.
The British pound held near a 30-month low versus the dollar
as the governing Conservatives' majority in parliament was
reduced to one seat, adding to concern over politics three
months before the country is due to leave the European
Union. Sterling GBP= was last trading at $1.213, down 0.01% on
the day.
U.S. crude CLc1 rose 2.84% to $55.48 per barrel and Brent
LCOc1 was last at $62.02, up 2.51% on the day.
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Bond Bonanza https://tmsnrt.rs/2yx5KJs
Daily closes for Brent, U.S. crude in 2019 png https://tmsnrt.rs/2yHHep7
$1 trillion wiped off global equities https://tmsnrt.rs/33gSkzo
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