Conflicting Trade Signals Rocked Markets With Three Hours of Chaos

Conflicting Trade Signals Rocked Markets With Three Hours of Chaos

Bloomberg  | Oct 10, 2019 12:20

Conflicting Trade Signals Rocked Markets With Three Hours of Chaos

(Bloomberg) -- Even for investors hardened by more than a year of trade-war headlines, it’s been a chaotic few hours.

Conflicting signals on the prospects for a deal between the U.S. and China sent S&P 500 futures on one of their wildest rides in recent memory, triggering four 1%-plus swings in contracts that track $24 trillion of U.S. equities in a span of three hours.

The moves underscored just how jittery investors have become as negotiators meet in Washington to attempt a deal that could have major consequences for the global economy.

Read more: China-U.S. Set to Talk With Global Economy Facing Trade Crucible

After a September with only two S&P 500 moves of more than 1%, October has seen four sessions registering that magnitude in the first seven trading days. Maxwell Grinacoff, a derivatives and quantitative strategist at Macro Risk Advisors, called the index’s 1.9% month-to-date drop a “spooky ‘Vol-tober’ sell-off” in a note on Wednesday, advising investors to employ hedges to manage the swings.

“Trade talks will make for twitchy trades,“ said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd.

Shortly after U.S. stock markets closed with a gain amid optimism about trade talks on Wednesday, futures began tanking on a South China Morning Post report that deputy-level discussions had made “no progress” and the principal Chinese negotiators might cut short their stay.

The market rallied on separate reports that top Chinese envoy Liu He would stay in Washington through Friday, before turning lower yet again. Then came another rebound on news that the White House may roll out a previously agreed currency pact with China as part of a deal that could also suspend a planned tariff increase next week.

Read more: U.S. Weighing Currency Pact With China as Part of Partial Deal

By 10:47 a.m. Hong Kong time, futures were almost back where they started, trading down less than 0.2%. The yen, yuan, oil and gold saw similar fluctuations.

Investor nervousness has increased against a backdrop of deteriorating economic data and escalating tensions between the U.S. in China in recent days.

On Monday, the Trump administration moved to blacklist Chinese tech firms including video-surveillance company Hangzhou Hikvision Digital Technology Co., alleging that they were complicit in human-rights violations in Xinjiang. U.S. officials are also reportedly moving ahead with discussions around possible restrictions on portfolio flows into China. A fight over free speech between China and the NBA, triggered by a tweet backing Hong Kong’s protesters, has added to the tense mood.

“Overall the market is pretty on the edge as we’ve seen bigger negative reactions toward trade news,” said Mingze Wu, a foreign-exchange trader at INTL FCStone Global Payments in Singapore.

Some investors have responded by adding hedges, helping push the Cboe Volatility Index, or VIX, steadily higher since late September. October futures on the index rose 1.8% on Thursday.

“The difficulty in predicting the final outcome of the trade dispute poses a challenge for investors,” Mark Haefele, global chief investment officer at UBS Wealth Management, wrote in a note on Wednesday. “Not even the negotiators themselves can yet be confident of the final result.”

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Canada) English (Australia) English (South Africa) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors. is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.