Monday Moneybeat: The trade war and the stock market

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: It was a wild, topsy-turvy week on Wall Street, with traders reacting to volleys in the trade war between the United States and China.

Stocks plummeted early in the week, in response to what we read in the financial papers as Beijing’s devaluing its currency.

All the major stock indexes lost three percentage points or more that day. It was the biggest single-day drop of the year. 

When it seemed clear that China’s currency, the yuan, had stabilized, stocks went back up. 

But then when President Trump said on Friday he didn’t mind if a scheduled round of trade talks between the United States and China didn’t happen, stocks fell again.

REICHARD: For the week, then, all of those indexes finished in negative territory. But the three biggest lost less than a percentage point: the Standard and Poor’s 500, the Dow Jones Industrials, and the Nasdaq. The Russell 2000, an index of smaller-company stocks, gave up 1.3 percent.

EICHER: President Trump officially labeled China a currency manipulator for letting the yuan fall in value relative to the U.S. dollar.

Economist Stephen Day of Virginia Commonwealth University says if anything what China did was stop manipulating its currency. Trump’s tariffs are doing real damage to China’s economy and its currency truly is worth less.

DAY: It means, pretty much what they’re doing is they’re stopping strengthening it. It’s confusing because you think of them as trying to weaken their currency. The last three years, they’ve been doing the opposite. So now, we have finally officially labeled them as a ‘currency manipulator.’  It’s like calling somebody a thief several years after they stole the thing.

Trump renewed his social-media lobbying of the Federal Reserve, the American central bank. He wants the Fed to cut interest rates still further and brace the economy against global economic threats. He got a boost Friday with release of the Producer Price Index for July. Wholesale prices increased just two-tenths of a percent over June. Year-on-year, prices are up just 1.7 percent. That’s a far cry from the Fed’s inflation target of two percent and suggests there’s still room for the central bank to lower interest rates without risking too-high inflation.

And that is today’s Monday Moneybeat.

(Chinatopix via AP) A bank employee counts U.S. dollar banknotes next to stack of 100 Chinese yuan notes at a bank outlet in Hai’an in eastern China’s Jiangsu province, Tuesday, Aug. 6, 2019.

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