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A TV screen shows the numbers after the closing bell at the New York Stock Exchange, Aug. 5. Photo: Johannes Eisele/AFP/Getty Images
Stocks continued their sell-off overnight as fears of further escalation in the U.S.-China trade war were realized after markets closed on Monday.
The big picture: Investors are beginning to fear that not only will the trade war dent business confidence and economic growth, but with further escalation and no end in sight, it could do massive damage to the entire global economy.
What they're saying: "These types of beggar-thy-neighbor policies were a hallmark of the Great Depression and caused a much larger economic downturn in its aftermath," said Joe Brusuelas, chief economist at consulting firm RSM.
Driving the news: The U.S. Treasury Department officially declared China a currency manipulator Monday night. It's a meaningless designation that the Trump administration has passed on before and is now making without any real evidence. In response, the Chinese Ministry of Commerce confirmed Chinese companies have stopped purchasing U.S. agricultural products.
By the numbers: Stocks have continued to fall around the world.
Of note: Other markets, including bonds, currencies and commodities, have had more subdued reactions, as investors in those assets had priced in more downside risk already.
Be smart: “The fundamentals are impacted by the trade war and by tariffs, but that’s not the only reason for the sell-off," Peter Cecchini, global chief market strategist at Cantor Fitzgerald, told Bloomberg.
The U.S. services sector slowed for a second straight month in July, showing the continued decline in American economic activity.
Why it matters: It was the lowest reading for the sector, which makes up around 70% of the U.S. economy, since August 2016.
What they're saying: The Institute for Supply Management said respondents to its survey "indicated ongoing concerns related to tariffs and employment resources. Comments remained mixed about business conditions and the overall economy.”
The big picture: The manufacturing sector has been in decline all year and is officially in recession. The services sector is far more important to the overall health of the economy and had managed to remain strong despite the trade war.
Yes, but: While the level of growth has been slowing, the services sector is still expanding and has been for 114 straight months.
Investors are pricing in a 100% chance the Fed cuts rates at its next meeting in September after Monday's market carnage, joining central banks around the globe that are providing more stimulus to their respective economies.
What's happening: Initially seen as a cautionary pause, the world's central banks have clearly returned to a path of lower interest rates that has not been seen since the global financial crisis.
What they're saying:
Illustration: Rebecca Zisser/Axios
In addition to bringing easier monetary policy, central banks also are diving deeper into the idea of issuing digital currencies, thanks in large part to concerns about Facebook's Libra.
The general manager of the Bank for International Settlements, known as the central bankers’ bank, told the Financial Times in June that global central banks may have to issue their own digital currencies sooner than expected.
The Philadelphia Fed also recently evaluated the prospect of central banks producing digital currencies. It found that doing so would likely be a net positive.
"While a digital currency tends to promote efficiency in exchange, it can also crowd out bank deposits, raise banks' funding costs, and decrease investment. Despite these effects, introducing a central bank digital currency often raises welfare."— Todd Keister and Daniel Sanches, in the Philadelphia Fed's research paper "Should Central Banks Issue Digital Currency?"
One of Monday's few bright spots for stock investors was Tyson Foods, which saw its shares jump 5% after reporting fiscal third-quarter earnings that beat expectations.
By the numbers: Net income rose more than $100 million to $676 million, and adjusted EPS beat consensus, according to FactSet. Total sales rose to $10.89 billion, from $10.06 billion last year.
The big picture: Investors were clearly impressed with Tyson's ability to perform and its potential to boost sales as worries about a swine flu outbreak have continued to reduce hog supplies in Asia.