Global markets hit with Brexit anxiety, US-China trade war standoff

Maelstrom of anxieties dragged down global markets as a whole Brexit chaos and worrisome manufacturing data with stalemate in the US-China trade war.

The latest rounds of tariffs from both nations took hold of the weekend, with each piling on to the hundreds of billions of dollars in the draw-out conflict.

Despite the fact that there is no place in the world, there will be no place where. On Monday, Beijing, United States with the World Trade Organization, said Washington's latest duties violated an agreement reached at the Group of 20 summit in Osaka, Japan.

The Dow Jones industrial average plunged 425 points at its deepest depth on Tuesday morning, but the blue chips staged a mini-rally in the last hour of the session. It finished at 26.118, down 285 points, or 1 per cent.

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The tech-heavy Nasdaq finished the day at 7874, an 88-point decline, or about 1.1 per cent. Tech stocks were hit hard, with Apple, Microsoft and IBM lower. The broad Standard & Poor 's 500 closed the first day of September at 2906, a loss of 20 points, or 0.7 percent. China-exposed heavyweights Apple and Caterpillar were down more than 1 percent.

US markets kicked off September after a volatile August, which included several big-one-day tumbles for the Dow. These are some of the most important things we have seen in the past.

In tweets on Tuesday, US President Donald Trump insisted negotiations with China were going well, then threatened to crack down on the world's second-largest economy if he wins reelection in 2020 and hinted he may target the European Union next.

"For all of the 'geniuses' out there, many who have been in other administrations and 'taken to the cleaners' by China, who want me to get together with the EU and others to go after China's trade remember, the EU & all treat us VERY unfairly on Trade also, "Trump tweeted. "Will change!"

In an interview on Tuesday with CNBC, one of Beijing's trade advisers said that the burden of ending the trade squalls with Trump. Wang Huiyao, president of the Center for China and Globalization, told Beijing-based think tank that China has made "all efforts" to address US complaints.

"It's up to the US to really go ahead and be very flexible," Wang said on CNBC. He added: "We can not have a perfect deal." "You can see that China has gone to the US for sake and interest for China itself."

The US manufacturing sector contracted in August for the first time since 2016, according to an IHS Markit industry report. The Manufacturing Purchasing Managers' Index Fellowship to their lowest level since September 2009, while new export orders are falling to their quickest pace in a decade, "linked by many firms to trade wars and tariffs."

Though manufacturing is a relatively small sector of total output, it is seen as a barometer for economic health. As the manufacturing sector in August signals a contraction, it suggests inflation risk is low but the potential for a US recession is more likely.

Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in a note to investors on Tuesday. "The US trade war with the world has opened a big hole in the world of secrets, and it will be a miracle if the broader economy can continue to roll over with manufacturing in decline."

Eight of 11 US stock market sectors were lower on Tuesday. Real estate, utilities and consumer goods, all safe-havens when a market drop, were positive. The big US manufacturing companies saw their stocks slide following the report.

Boeing was the biggest drag on the Dow, dropping 3 percent. Industrials and energy companies were weighing on the Dow, with Goldman Sachs and American Express leading the financials downward. Chevron and Exxon dropped on lower oil prices. Pfizer and Procter & Gamble were the best blue-chip performers.

Boeing shares were hurt on the following day.

The British pound sank to its lowest level since October 2016, as the rebel members of Parliament prepared to push for a three-month Brexit delay in defiance of Prime Minister Boris Johnson's plan for Britain to exit the European Union by the end of October, with gold without a deal.

"The market in the UK is likely to be affected by the crisis," Russell Mold, investment director at AJ Bell, said in a note to investors.

The European benchmark Stoxx 600 rallied from its lows, finishing down 0.23 per cent.

The trade war has been swept away by the world, and fears are rampant that the conflict is sparking a global slowdown. Japan announced Monday that its manufacturing spending has fallen for the first time in two years during the second quarter, which experts see more of the trade war's dampening effect. Central banks in Europe, Asia and Australia, quoting the need for economic stimulus.

Meanwhile, China's yuan fell to an 11-year low in offshore trading on Tuesday. China's economic growth has been slowed down to 27 years, as factory output declines and unemployment rises. On Tuesday, China reported its biggest one-month drop-off in nearly eight years, marking a major slowdown for the producer of more than half the world's steel.

At home, fallout from the trade is spurring recession fears. Last week, the US Commerce Department said that US economic growth had been slowed down. Gross domestic product grew at an annualized rate of 2 percent, the department said, revised down from an estimate of 2.1 percent last month.

The bond market has also been desperate for stable ground.

The US bond market is one of the few places in the world where bond investors can park their money for long periods and collect a positive return. When bond prices rise, the yield that investors earn on their money drops. That has contributed to the reversal that is stoking recession fears.

The yield on the 10-year US Treasury on Tuesday. Tuesday's manufacturing data shows contraction only added to the worries about the global economy. Investors flocked to buy even more US bonds as they worried low inflation, or even a potential recession.

"The ISM data is a lot less than expected, in particular to new orders," said Joe LaVorgna, chief economist at Natixis. "That's creating tremendous demand for U.S. Treasuries."