Stocks fall after LVMH warns of softening demand in China

Louis VuittonLuxury group LVMH delivered solid growth in Q3 Fy18, reporting a 10 per cent boost in revenues to €33.1 billion in the first nine months of this year, but said that it would continue to be vigilant in the months ahead in an “uncertain geopolitical and monetary context”.

The Louis Vuitton owner’s warnings about softening demand in China hit US stock indexes, driving falls in luxury goods companies.

Shares in upscale jewellery retailer Tiffany & Co and perfume maker Estee Lauder both fell 7 per cent.

That all played into a market that is increasingly worried about global growth after warnings from the IMF this week and a rise in Treasury yields to a more than 7-year high above 3.0 per cent that signals a tightening of available capital globally.

US Treasury yields held near multi-year highs after producer prices climbed 0.2 per cent in September, feeding into the pressure on the Federal Reserve to continue to raise interest rates even as the global economy struggles with headwinds from President Trump’s trade war with China.

“The direct concern is higher interest rates,” said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

“People fear building prices into the system, both from China trade problems, other tariffs the US has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices.”

At 9:59am local time the Dow Jones Industrial Average was down 202.46 points, or 0.77 per cent, at 26,228.11, the S&P 500 was down 27.02 points, or 0.94 per cent, at 2,853.32 and the Nasdaq Composite was down 129.45 points, or 1.67 per cent, at 7,608.57.

Eight of the 11 sectors were lower, with only the defensive utilities, real estate and consumer staples sectors higher.

Heavyweights Apple shed 1.6 per cent and fell 2.5 per cent. A Republican senator has asked the two companies for a staff briefing about a Bloomberg report that the Chinese government implanted malicious hardware into server motherboards provided by Super Micro Computer.

Alibaba dropped 4.1 per cent after Morgan Stanley and Raymond James cut their near-term profit estimates on the Chinese e-commerce company, citing a softer economic environment in China.

Sears Holdings plunged 32 per cent after the Wall Street Journal said the debt-laden retailer was preparing for a possible bankruptcy.

Declining issues outnumbered advancers for a 2.77-to-1 ratio on the NYSE and a 2.07-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52-week highs and 28 new lows, while the Nasdaq recorded six new highs and 90 new lows.

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