* USD index weakens after Powell speech, Trump tweets
* Trump threatens action on China later in the day
* U.S. crude on track for weekly decline
* U.S. two-year/10-year yield curve inverts
(Updates prices)
By Rodrigo Campos
NEW YORK, Aug 23 (Reuters) - Stocks and oil prices fell
sharply on Friday while traditional safe havens rose after U.S.
President Donald Trump threatened to further escalate his trade
war with China "this afternoon," following a new round of
retaliatory tariffs from Beijing.
Earlier on Friday China's Commerce Ministry said in a
statement it would impose tariffs on about $75 billion in
imports from the United States including some agricultural
products, crude oil and small aircraft. Trump responded mid-morning in a series of tweets, writing
that "American companies are hereby ordered to immediately start
looking for an alternative to China." Trump cannot force U.S. companies to abandon China and he
gave no detail on how he might proceed with any such order. But
his series of tweets was seen as a harbinger for even further
escalation of the trade war.
"Clearly when you look at U.S. yields and the dollar's
reaction, there are concerns that these latest comments from
Trump on China will push the U.S. into recession," said Marvin
Loh, senior global markets strategist at State Street (NYSE:STT).
Stocks that benefit during economic expansions fell the
most, also hinting at recession concerns.
"There is a lot of worry here. I would say what (Trump) is
tweeting is disconcerting. It's a fair reaction from the
markets. I don't think anyone thought we'd get to this level,"
said Michael O'Rourke, chief market strategist at JonesTrading.
The Dow Jones Industrial Average .DJI fell 547.71 points,
or 2.09%, to 25,704.53, the S&P 500 .SPX lost 65.23 points, or
2.23%, to 2,857.72 and the Nasdaq Composite .IXIC dropped
215.03 points, or 2.69%, to 7,776.36.
The pan-European STOXX 600 index .STOXX turned sharply
lower after Trump's tweets, dropping 1% in the last half hour of
trading to close down 0.78%, while MSCI's gauge of stocks across
the globe .MIWD00000PUS dropped 1.29%.
Emerging market stocks lost 0.48% and U.S.
dollar-denominated Nikkei futures NKc1 fell 1.8%.
OIL, YIELDS FALL
Oil prices fell after China's retaliatory tariffs
announcement highlighted concern the trade dispute between the
world's two largest economies could slow global growth or even
trigger a recession.
Trump's tweets made matters worse.
"We still view the U.S.-Chinese trade standoff as a major
bearish consideration that will likely be requiring additional
downward oil demand adjustments as this year proceeds," said Jim
Ritterbusch, president of Ritterbusch and Associates.
U.S. crude CLc1 fell 2.17% to $54.15 per barrel and Brent
LCOc1 was last at $59.33, down 0.98% on the day.
Trump's comments came after Federal Reserve Chair Jerome
Powell said the U.S. central bank will "act as appropriate" to
keep the economic expansion on track, but noted rising risks.
Powell's remarks had somewhat given markets relief after the
overnight announcement from Beijing. Trump's tweeted response to
the speech labeled Powell an "enemy."
The two-year/10-year yield curve inverted last week for the
first time since 2007, a signal that a U.S. recession is likely
in one to two years. The curve has traded in and out of
inversion over the past three days.
U.S. Treasury yields fell, with 10-year notes US10YT=RR
last up 25/32 in price to yield 1.5266%, from 1.61% late on
Thursday.
The two-year/10-year yield curve tripped to negative
territory early in the session and for a third consecutive day.
The U.S. dollar fell after Powell's comments and dropped
further after Trump's tweets.
The dollar index .DXY fell 0.54%, with the euro EUR= up
0.6% to $1.1145.
The Japanese yen strengthened 1.06% versus the greenback at
105.33 per dollar, while sterling GBP= was last trading at
$1.2286, up 0.29% on the day.
Spot gold XAU= added 2.0% to $1,528.05 an ounce.
Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
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