Stocks SINK, Bonds Rally on Trump’s Metals Duties: Markets Wrap
U.S. stocks plunged and Treasuries climbed Thursday after U.S. President Donald Trump promised to impose substantial tariffs on foreign metals, drawing a rebuke from a manufacturing industry group and the European Commission. The S&P 500 Index briefly fell below its 100-day moving average while the Dow Jones Industrial Average dropped more than 400 points as Trump added to earlier confusion on the fate of proposed tariffs by announcing the levies in a meeting with industry executives. The Institute for Supply Management called the proposal a “big mistake.” European Commission President Jean-Claude Juncker said Europe will respond “firmly” to any new tariffs. And Federal Reserve Chairman Jerome Powell earlier praised the benefits of trade. “Trump made the announcement about tariffs and it dropped,” said Donald Selkin, New York-based chief market strategist at Newbridge Securities Corp. “It would raise the price of autos, look at the auto stocks. It would raise the price for items that use steel and aluminium.” The market reaction was uneven. While industrial companies in the S&P 500 tumbled, U.S. Steel Corp. advanced 5.7 percent and steel-products company Nucor Corp. gained 3.5 percent. Automakers led decliners as Ford Motor Co. and General Motors Co. added to losses already sparked by weak sales numbers. The Russell 2000 Index posted the smallest loss among major indexes as the bulk of its members derive most of their sales in the U.S.
Norges Bank Has Inflation Target Cut After Struggling to Meet It
Norway lowered the central bank’s inflation target after policy makers struggled to meet the goal, going against the grain in a global debate where many have called for levels to be raised to drag up interest rates. The government reduced the target to 2 percent from 2.5 percent, bringing it in line with other central banks such as the European Central Bank, the Federal Reserve and Sweden’s Riksbank. The Norwegian krone gained as much as 0.8 percent against the euro as the change paves the way for potentially higher interest rates. The decision reflects Norway’s evolution from an economy heavily reliant on oil to one that’s trying to become less dependent on fossil fuels. But the change also coincides with a global struggle to revive inflation after years of record monetary policy stimulus. Norwegian policy makers, who have signalled they will increase rates later this year, have contended with price growth far below their target since a collapse in the country’s oil industry. “The period of phasing in oil revenues is now largely behind us,” Finance Minister Siv Jensen said in a statement. “There are no longer any compelling arguments for targeting a higher inflation rate than other countries.” Kari Due-Andresen, chief economist at Svenska Handelsbanken AB, questioned the move, saying it goes against the flow of an international debate in which many are recommending a higher target to ease the danger of approaching zero bound.
China’s GDP Target to Set the Tone for Power Summit
A momentous fortnight for China’s economy begins next week when leaders set policies for the year and detail plans to curb financial risk, air pollution, and excess industrial capacity. Things kick off Monday morning in Beijing with Premier Li Keqiang’s work report outlining 2018 goals for economic growth, money supply, credit growth, inflation and the fiscal deficit. Senior appointments, including those for central bank governor and, potentially, chief of a merged financial regulator, will also be announced or discussed at the meeting, providing more fodder for analysts and economists to shape the outlook for the coming year. It all wraps up around two weeks later with Li’s annual press briefing on policy goals. The pow-wow comes as concern is creeping into analysts’ views on the economic outlook. Though 2017 outperformed and economists have been upgrading forecasts for this year, Nomura Holdings Inc., Morgan Stanley and State Street Corp. have all warned of a slowdown. President Xi Jinping didn’t specify a longer-term growth target at the twice-a-decade Party Congress in October, and policy emphasis has shifted toward quality of growth over quantity. That’s led some to say China should ditch its long-standing practice of setting a numerical growth target in favor of a forecast. But Yang Weimin, an official from the Communist Party committee overseeing economic policy, says targets won’t be abandoned before 2020.