NEW YORK (Reuters) – The dollar and global stock markets retreated on Monday after U.S. President Donald Trump said he would restore tariffs on some imports from Brazil and Argentina, overshadowing data that showed the Chinese and euro zone economies were stabilizing.
Stocks slid further on data from the Institute for Supply Management (ISM) showing the U.S. manufacturing sector contracted for a fourth straight month in November as new orders slid to around their lowest level since 2012.
A World Trade Organization ruling that the European Union continues to provide unfair subsidies to European planemaker Airbus (AIR.PA), which supports the U.S. case for retaliatory tariffs, also weighed on European equities.
Germany’s export-sensitive DAX .GDAXI stock index tumbled 1.9%, its worst single-day decline since early October, when the WTO approved U.S. moves to slap import tariffs on $7.5 billion worth of European goods.
MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.52%, while the pan-European STOXX 600 index lost 1.56%.
Trump’s tweets triggered selling that accelerated on last month’s below-expectations U.S. manufacturing activity, said Fawad Razaqzada, market analyst at Forex.com in London.
“It’s a number of reasons coming in all at the same time,” Razaqzada said. “But with the stock markets at record high levels, this is always going to happen. Markets go up in stairs and then on the way down, it’s an elevator.”
The major U.S. indexes last week hit record highs and MSCI’s index of equity markets in 49 countries was one point below an all-time high established in January 2018.
The Dow Jones Industrial Average .DJI fell 213.54 points, or 0.76%, to 27,837.87, the S&P 500 .SPX lost 22.75 points, or 0.72%, to 3,118.23 and the Nasdaq Composite .IXIC dropped 96.44 points, or 1.11%, to 8,569.03.
ISM said its index of U.S. factory activity dropped 0.2 point to a reading of 48.1 in November. A reading below 50 indicates contraction in factory output, which accounts for 11% of the U.S. economy. The index needs to break below 42.9 to signal a recession.
The dollar dropped from six-month highs against the Japanese yen and slid to a two-week trough versus the euro after the U.S. manufacturing report.
Market enthusiasm that has pushed U.S. stocks to record levels was predicated on a recovery and Monday’s data belied that trend, said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.
Looking at holiday sales, “there’s going to be plenty of good news to go around,” Ablin said. “We could get some really solid news to carry this market at least for the next week or so,” he said.
Commerce Department report that showed U.S. construction spending unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years also weighed on markets.
Benchmark 10-year U.S. Treasury notes US10YT=RR fell 15/32 in price to yields up to 1.8258%.
Oil jumped above $61 a barrel, supported by hints that the Organization of the Petroleum Exporting Countries and its allies may agree to deepen output cuts at a meeting this week and as rising Chinese manufacturing activity suggested stronger demand.
U.S. crude CLcv1 rose 1.65% to $56.08 a barrel and Brent LCOcv1 gained 78 cents to $61.27.
Germany’s borrowing costs rose after the Social Democrats (SPD) chose new leaders critical of their own ruling coalition, with yields on benchmark 10-year debt set for the biggest one-day spike in nearly three months.
Benchmark German bond yields jumped across the board, with 10-year yields DE10YT=RR up more than 7 basis points to -0.273%, their highest in nearly three weeks.
Reporting by Herbert Lash; Editing by Dan Grebler