The arrest of a high-level Chinese executive and its potential impact on the fragile US/China trade relationship triggered a global sell-off that drove Wall Street's major market averages into the red for 2018. Led by losses in trade-sensitive sectors as well as energy stocks, at its worst the Dow Jones Industrial Average fell almost 800 points from Tuesday and was at its lowest level in six months.
Panic selling erupted overnight when news that Wanzhou Meng -- Chinese telecom Huawai's chief financial officer -- was arrested in Canada and faced US extradition. Wanzhou, an influential executive in China and daughter of Huawai's founder, was accused of violating a trade embargo by selling telecommunications equipment to Iran.
Rekindled tensions with China compounded with falling energy prices and the persistent tightening of the Treasury yield curve resulted in a sea of red across global equity markets with the Euro Stoxx 600 at its lowest level since 2016 and Germany's DAX below 11,000 for the first time in two years.
The deluge of economic data released this morning was mixed and did little to stifle selling pressure. Bullish data included a 2.3% gain in nonfarm productivity; November Institute for Supply Management non-manufacturing index of 60.7 from 60.3 in October; and slight upward revision to the services sector PMI for November (though down slightly from October. Additionally jobless claims were down 4,000 in the latest survey week to 231,000.
Bearish data included a 179,000 increase in private payrolls, above 175,000 estimates, but down from 225,000 in October; the trade deficit widened to a 10-year high of $55.5 billion as the US trade deficit with China hit a record high; and factory orders slumped 2.1% and were up by just 0.3% excluding the volatile transportation sector.
Remarks supporting a "patient" Fed from Dallas president Robert Kaplan also failed to stem the meltdown on Wall Street. Kaplan warned that waning fiscal stimulus and eight rate hikes in two years will create a "very different" economy is the first half of 2019 than now. Like Fed Chairman Jerome Powell, Kaplan believes rates are just "a little below" neutral.
The energy market was also limping into Thursday's close with Brent crude falling more than 3% after the Saudi oil minister said it is unlikely members of the Organization for the Petroleum Exporting Countries will agree to a production cut at this week's meeting. West Texas intermediate is on the brink of sub-$50 per barrel while Brent is back under $60/barrel.
Crude oil was down $3.55 to $51.01 per barrel. Natural gas was down $0.11 to $4.36 per 1 million BTU. Gold was up $3.20 to $1,245.90 an ounce, while silver was down $0.05 to $14.53 an ounce. Copper was down $0.04 to $2.73 per pound.
Among energy ETFs, the United States Oil Fund was down 3.13% to $10.84 with the United States Natural Gas Fund down 2.18% to $35.53. Among precious-metal funds, the Market Vectors Gold Miners ETF was up 0.41% to 19.69 while SPDR Gold Shares were up 0.20% to $117.36. The iShares Silver Trust was down 0.29% to $13.58.
Here's where the markets stand at mid-day:
NYSE Composite Index was down 278.42 points (-2.28%) to 11,944.62
Dow Jones Industrial Index was down 398.53 points (-1.59%) to 24,628.54
S&P 500 was down 34.09 points (-1.25%) to 2,666.31
Nasdaq Composite Index was down 21.81 points (-0.34%) to 7,134.77
FTSE 100 was down 217.79 points (-3.15%) to 6,704.05
DAX was down 389.26 points (-3.48%) to 10,810.98
CAC 40 was down 163.91 points (-3.32%) to 4,780.46
Nikkei 225 was down 417.71 points (-1.91%) to 21,501.62
Hang Seng Index was down 663.30 points (-2.47%) to 26,156.38
Shanghai China Composite Index was down 44.62 points (-1.68%) to 2,605.18
NYSE SECTOR INDICES
NYSE Energy Sector Index was down 385.82 points (-3.68%) to 10,093.84
NYSE Financial Sector Index was down 187.31 points (-2.50%) to 7,310.51
NYSE Healthcare Sector Index was down 425.67 points (-2.63%) to 15,774.52
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