Stocks Plunge on Global Growth Uncertainty, U.S.-China Trade Dispute

U.S. stocks declined sharply on Thursday, as the Dow headed for its first back-to-back losses of 2019 after the Bank of England (BOE) delivered a pessimistic outlook on its economy. The Brexit risk cascaded through the financial markets as investors cut ties to riskier assets.

U.S. Stocks Slide

All of Wall Street’s major indexes declined sharply, with the Dow Jones Industrial Average sliding as much as 390 points. The blue-chip index would later pare losses to settle down 220.77 points, or 0.9%, at 25,169.53.

The broad S&P 500 Index declined 0.9% to 2,706.05, with five of 11 primary sectors reporting losses of 1% or more. Shares of energy companies declined 2.1% on average as oil prices fell anew.

The technology-focused Nasdaq Composite Index declined 1.2% to close at 7,288.35.

A measure of implied volatility known as the CBOE VIX rose sharply on Thursday, as turbulence returned to the market. The market’s preferred measure of investor anxiety reached a high near 18.00 before paring gains later in the session.

Brexit Blowback

The Bank of England on Thursday delivered pessimistic guidance on the British economy, as tensions over Brexit continue to undermine consumer and business confidence. In its Inflation Report, the central bank warned that the “fog of Brexit” will hang over the British economy for the foreseeable future. As a result, the economy is seen growing at its weakest pace in a decade.

Central bankers lowered their growth outlook this year to 1.2%, down from 1.7% in November. The 2020 growth outlook was revised down to 1.5% from 1.7%.

The downward revision rippled across the financial markets, sending a strong signal to investors that the global economy was facing strong headwinds. Last month, the International Monetary Fund (IMF) lowered its outlook on global growth amid ongoing trade tensions between the U.S. and China.

Trump-Xi Meeting More than a Month Away

Markets hastened their decline Thursday after CNBC reported that President Trump and Chinese counterpart Xi Jinping are unlikely to meet before a self-imposed deadline in March. In December, both leaders agreed to suspend tariff hostilities for 90 days to allow both sides to negotiate a new trade agreement.

The truce will have run its course by Mar. 1 and a meeting between the two leaders is “highly unlikely” before that time. Without a trade deal or extension to the current negotiating window, additional tariffs on Chinese goods will come into force.

Both sides have made important strides in recent months, though a comprehensive trade deal remains far apart. U.S. Commerce Secretary Wilbur Ross said last month that the two countries remain “miles and miles apart” on an agreement. An ongoing investigation into Huawei could also impact negotiations after the Department of Justice laid criminal charges against the Chinese telecom giant.

Read more: Bye Bye Trade War? China Plans $1 Trillion Buying Spree to Reduce U.S. Trade Deficit.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi