After Two Days of Big Hits to the US Market, the World Outlook is Still Bleak

Matty-Sways

Worries over an economic downturn have grown this week following bad composite purchasing numbers in Europe and US.

Fears of an economic downturn have grown this week following the release of weaker-than-expected readings on U.S. factory activity and private-sector job growth. Later today, investors will be watching for data on U.S. services activity in September, as well as August factory orders, for clues about growth in the world’s largest economy.

“The total size or volume of tariffs being applied to what does amount to quite an array of goods is actually very small when you consider just the goods trade between the U.S. and the European Union,” said Matt Cairns, rates strategist at Rabobank.

The yield on U.S. 10-year Treasurys dropped to 1.589% Thursday, from 1.594% Wednesday.

The WSJ Dollar Index, which measures the currency against a basket of its peers, was down 0.1%.

“The [global] economy is fine without further escalation of the trade war, but what does an investor really have in terms of the next step in trade wars?” said Emiel van den Heiligenberg, head of asset allocation at Legal and General Investment Management. “No one can really predict what Trump will do next and that makes investors nervous.”

The Stoxx Europe 600 slipped 0.2%.

In Asia, Japan’s Nikkei fell 2%, while Hong Kong’s Hang Seng rose 0.3%.

The IHS Markit composite purchasing managers index, which is a good measure of the work service providers are completing and the production manufacturers are putting out, dropped to 50.1(lowest reading since June 2013) in September from 51.9 in August.

The U.K. services purchasing managers index hit a six-month low of 49.5, below the 50 level is considered economic contraction. It restarted concerns that the economy is in recession, analysts at Capital Economics said, adding that economic performance will remain “well below par” while Brexit negotiations drag on.

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