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Stocks drop as trade tensions threaten earnings

Published 2019-07-09, 11:49 a/m
© Reuters.  Stocks drop as trade tensions threaten earnings

* BASF shares fall almost 6% after profit warning

* Dollar firm as markets look to Fed chair's testimony

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

* World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By April Joyner

NEW YORK, July 9 (Reuters) - Stock markets around the world broadly fell on Tuesday as trade tensions weighed on the outlook for corporate earnings and as hopes dwindled over a hefty U.S. interest rate cut this month.

European and U.S. equities dropped after German chemicals giant BASF BASFn.DE warned of a 30% fall in its adjusted annual profit, citing trade friction and a global slowdown in growth. Wall Street, an analyst downgrade of 3M (NYSE:MMM) Co MMM.N contributed to a drop in industrial shares. 3M was the biggest drag on the Dow Jones Industrial Average, which fell 0.32%. The U.S. benchmark S&P 500 index .SPX , however, was little changed, while the Nasdaq .IXIC shed losses to gain 0.22% as tech shares edged higher.

The effect of trade tensions will be a major theme in the U.S. corporate earnings season, set to begin later this month.

"Trade is going to be a drag on earnings, and it remains to be seen if it's been fully reflected in (stock) valuations," said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.

Yet some encouraging news on trade came on Tuesday as the United States and China were set to relaunch talks this week after a two-month hiatus. White House economic adviser Larry Kudlow said talks with the European Union to move forward on a trade agreement were also in progress. Treasury yields rose on those developments. Benchmark 10-year notes US10YT=RR last fell 5/32 in price to yield 2.0509%, from 2.034% late on Monday. European equities, shares of Deutsche Bank DBKGn.DE extended their fall following news of the bank's reorganization plans, including the elimination of 18,000 jobs worldwide. The broad STOXX 600 .STOXX fell 0.5%.

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MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.18%.

In the currency markets, Britain's sterling GBP= dropped to a six-month low and was last 0.4% lower against the dollar at $1.2459 amid a worsening economic outlook and rising fears about a no-deal exit for Britain from the European Union. broader focus, though, remained the potential reaction to a weaker global outlook from the world's top central banks, especially what U.S. Federal Reserve Chairman Jerome Powell will say during testimony before Congress on Wednesday.

Money market futures 0#FF: are still fully pricing in a 25 basis-point cut at the Fed's July 30-31 meeting, but have almost priced out a larger 50 bps move that had been seen as a real possibility just a couple of weeks ago.

The dollar index .DXY , which measures the greenback against a basket of six major currencies, rose 0.10%, while the euro dipped 0.06% to $1.1207. would be pretty disruptive at this stage for Powell to rule out a cut in July or dampen expectations of a cut in July," said Michael Metcalfe, head of global macro strategy at State Street (NYSE:STT) Global Markets.

Oil prices firmed after a dip in Asia as OPEC supply cuts and Middle East tensions outweighed the U.S.-China trade dispute that has been dragging down the global economy and oil demand.

Brent crude LCOc1 futures rose 11 cents to $64.22 a barrel, a 0.2% gain. U.S. crude CLc1 futures rose 10 cents to $57.76 a barrel, a 0.2% gain. gold XAU= ticked 0.2% higher to $1,397.51 an ounce.

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<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Dot plot, Fed funds futures July 9

https://tmsnrt.rs/2YLmEzm Euro zone government debt falls further into negative yielding territory

https://tmsnrt.rs/2YFiJUF U.S. government debt yield curve

https://tmsnrt.rs/2YHFE1M

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