A massive sell-off swept global stock markets this morning after US Treasury Secretary Scott Bessent told the Financial Times that China “will be most affected” if it does not submit to Washington’s trade demands. At the same time, China has shown no signs of backing down in President Trump’s trade war: It has imposed sanctions banning Chinese companies from doing business with the U.S. subsidiaries of South Korean shipbuilder Hanwha Ocean. South Korea’s KOSPI fell 0.63% following this news.
S&P 500 futures were down 0.87% this morning. Markets in Asia and Europe were almost all lower, with Japan’s Nikkei 225 down 2.58% and Europe’s Stoxx 600 down 0.49% by mid-morning.
Beijing’s new export controls on rare earths – which the United States depends on – are “a sign of the weakness of their economy, and they want to drag everyone down with them,” Bessent said. “There may be a Leninist business model where harming your customers is a good idea, but they are the biggest supplier in the world,” he told the FT. “If they want to slow down the global economy, they will suffer the most. »
“They are in the middle of a recession/depression and they are trying to get out of it by exporting. The problem is that they are exacerbating their position in the world.” (China is actually doing very well. Its exports grew 8.3% in September, and the World Bank expects Chinese GDP to grow 4.8% this year. U.S. growth is forecast at 1.4%.)
The mood among traders today is a sharp reversal from yesterday, when the S&P 500 rose 1.56% after investors realized that Trump and Chinese President Xi Jinping would likely meet at the upcoming APEC conference in late October — an opportunity for the two men to strike one of Trump’s famous deals.
Elsewhere, there was little to boost market morale. A third of punters on Polymarket believe the US government shutdown will continue beyond November 8.
Pantheon Macroenomics noted that consumer confidence remains weak: The University of Michigan consumer survey, which asks whether shoppers feel it’s a good time to make a major purchase, “now indicates that year-over-year growth in this measure of core spending will soon slow to near zero, a far cry from the 6% pace of earlier this year,” according to Samuel Tombs and Oliver Allen.
Goldman Sachs added to the gloom by publishing a note this morning titled “Jobless Growth.” “The modest employment growth and strong GDP growth seen recently are likely to be normal to some extent in the years ahead. We expect the vast majority of potential U.S. GDP growth to come from solid productivity growth driven by advances in artificial intelligence (AI), with only a modest contribution from labor supply growth due to population aging and decline in immigration,” said authors Pierfrancesco Mei and David Mericle.
Longer term, however, most analysts continue to expect stocks to rise, largely driven by the technology and AI sector.
“About half of this rise in the S&P 500 was driven by just seven stocks: Amazon (AMZN), Alphabet (GOOG/L), Apple (AAPL), Broadcom (AVGO), Meta (META), Microsoft (MSFT) and NVIDIA (NVDA),” Jeff Buchbinder and Adam Turnquist of LPL Financial told clients in a note. But “the Fed is in the middle of a rate-cutting cycle and inflation appears to be under control despite rising tariffs, likely eliminating this as a potential bull market killer.” »
Here’s a look at the markets before the open in New York this morning:
- S&P 500 Futures Contracts were down 0.87% this morning. The index closed up 1.56% in its last session.
- STOXX Europe 600 was down 0.47% at the start of the session.
- The UK’s FTSE 100 was stable at the start of the session.
- Nikkei 225 in Japan was down 2.58%.
- The Chinese CSI 300 was down 1.2%.
- South Korea’s KOSPI was down 0.63%.
- India’s Nifty 50 was down 0.42% before the end of the session.
- Bitcoin had fallen to $111.8k.
