industry

Dow Jones PLUNGES as US trade war with China escalates


The US stock index saw a sharp drop of 314 points today, as it was dragged down by declining Caterpillar and Apple, which respectively lost 4 percent and 2.35 percent.

The S&P 500 also fell 1.4 percent, as the consumer discretionary and tech sectors fell behind.

Together, the and S&P 500 fell more than 4 percent each during October.

And the Nasdaq performed even worse, plunging by more than 6.5 percent. 

One of the main reasons to sell cited by investors was the ongoing trade war between China and the US.

China’s stocks also didn’t hold too well, with the Shanghai Composite dropping 2.9 percent, a record-low recorded for the first time since November 2014.

Nick Raich, CEO of The Earnings Scout, said in a note to clients: “Mr. Market is speaking loud and clear on China.

“The country is losing and needs to cry uncle. 

“Chinese stocks are now at a four year low as rising U.S. interest rates and the likelihood of less favorable trade deals is going to adversely impact Chinese companies profits next year and its market price is re-setting lower to reflect that.”

The slowdown may have been triggered also by recent comments on China’s trading made by US officials.

The US National Economic Council Director Larry Kudlow said: “They are unfair traders. They are illegal traders. They have stolen our intellectual property.

“China has not responded positively to any of our asks.”

Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management, argued the Chinese government will bend to the US’ demands and come to a negotiating table to break the stand-off and tariff war.  

He said: “Ultimately, they will come to the negotiating table.

“I don’t see how it benefits either country to spark a recession.”

Maurice Obstfeld, the International Monetary Fund’s chief economist, also blamed this month’s Dow Jones slump on the growing tensions between the US and China.

He said: “When you have the world’s two largest economies at odds, that’s a situation where everyone suffers.

”Trade policy reflects politics and politics remain unsettled in several countries, posing further risks.” 

US President Donald Trump issued a first set of hefty tariffs on Chinese imports in March.

In September, he issued further tariffs worth $200bn worth of Chinese goods.

Other reasons found by market experts were the rising interest rates and fears US tech stocks may be overvalued.

International politics also played a major role in today’s fall of the Dow Jones, as stocks fell as Treasury Secretary Steven Mnuchin pulled off an investment conference in Saudi Arabia, as the kingdom is under growing pressure following the death of Saudi journalist Jamal Khashoggi. 



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