Australia’s stock market was once again a regional laggard, coming after the ASX 200’s biggest gain in two years on Monday.
The market fell 1% to 5713.1, finishing at session lows, as energy pulled back 1.4% despite a fresh 1% gain in oil prices and with materials falling 1.1%.
Financials lost 1.2% while consumer discretionaries shed 1.8% to set a 14 month low.
The Dow Jones Industrial Average fell more than 600 points intraday and bond yields plummeted, as investors’ doubts over the trade truce struck between the U.S. and China renewed anxieties around the pace of economic growth.
Investors broadly retreated from stocks, with industrial stalwarts like Boeing and Caterpillar suffering steep losses. Apple and other technology companies also slid, pulling the Nasdaq Composite back more than 10% below its August high.
Waning enthusiasm for the 90-day tariff cease-fire struck over the weekend fueled the losses, several investors said, stirring worries that ongoing spat between the world’s two biggest economies could unravel economic growth in the U.S. and put additional pressure on Europe and Asia, which are already struggling.
Those growth fears pushed investors into assets that tend to be safer stores of value during periods of economic instability, including U.S. government bonds and shares of utility companies, which typically pay hefty dividends.
The flight from stocks to bonds sent several warning signals of an economic slowdown reverberating through markets.
Gold prices rose for the fourth time in the last five sessions, boosted by a weaker dollar.
Front-month gold for December delivery rose 0.6% to $1,241.10 a troy ounce on the Comex division of the New York Mercantile Exchange, its highest close since July 12.
A stronger dollar makes gold and other commodities more expensive for overseas buyers, while higher rates make gold less attractive than yield-bearing assets.
IRON ORE: 66.83 +1.26 (December contract)
Oil futures settled modestly higher as traders continued to weigh the likelihood of an output-cut agreement later this week between major oil producers.
The CME OPEC Watch Tool pegged the probability of a “small production cut” at the Dec. 6 meeting of the Organization of the Petroleum Exporting Countries at 59.2%, down from 65.4% early in the day. January West Texas Intermediate oil rose 30 cents, or 0.6%, to settle at $53.25 a barrel on the New York Mercantile Exchange after settling 4% higher on Monday.
The dollar fell intraday, adding to its declines from a day earlier as traders continued to unwind bets that the U.S. economy will significantly outperform the rest of the world in the coming year.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was down 0.2% at 90.08.
The dollar has edged lower in recent weeks along with U.S. Treasury yields as investors and analysts have scaled back their expectations for economic growth in 2019 and several Federal Reserve officials suggested that they could soon slow down their pace of interest-rate increases.
Providing another blow to the dollar was the news over the weekend that the U.S. will postpone additionally planned tariffs on Chinese goods – a development that bolstered an array of other currencies since many investors believe the U.S. economy would be less damaged than others by an escalating trade conflict.
The Stoxx Europe 600 fell 0.7% to 358.43 as concerns about U.S.-China trade tensions resumed, with the more positive sentiment at the start of the week proving short-lived.
Germany’s DAX fell 1.1%, with automakers broadly lower. France’s CAC 40 lost 0.8% and the U.K.’s FTSE 100 ended down 0.6%. Concerns about Italy’s proposed budget deficit and continued opposition to it from the EU continued to play on investors’ minds, too, with Italy’s FTSE MIB closing down 1.4%. Spain’s Ibex 35 ended down 1.3%.
In Asia, stocks finished broadly lower after big gains in many markets on Monday following the U.S.-China trade detente.
Singapore was down 1% and Korea’s Kospi dropped 0.8% on weakness in chip stocks.
Japan was the noted underperformer as the Nikkei slid 2.3% amid a stronger yen and rising bond prices, erasing half of its gains from a seven-day winning streak. Chinese stocks rallied late to finish modestly higher and the Philippine benchmark rose 2.3%, extending a streak of strong gains.
With the exception of China, Asian markets were mostly down. Japan’s Nikkei index fell 2.4%, South Korea’s Kospi was down 0.8% and Taiwan’s Taiex was down 0.5%.
Chinese assets remained relatively buoyant as investors breathed a sigh of relief after months of trade-driven pressure on equities indexes. Both the Shanghai Composite Index and the Shenzhen A-Share gained 0.4%, while the Chinese yuan climbed 0.6% against the U.S. dollar, paring some of its heavy 2018 losses. Hong Kong’s Hang Seng was also up 0.3%.