Stock market slump raises fears of deeper pain

The S&P 500's 3.2 percent slump on Monday in reaction to an escalating U.S.-China trade war has added to fears that a prolonged market correction could already have started.The slide left the benchmark index down 6per cent from its record high close on July 26. That was its deepest fall from a record high since a 6.8 percent selloff that began in early May and lasted a month, also driven by nervousness about the year-long trade conflict.

"We now need to prepare ourselves for a sharper U.S. equity market correction as investors reprice the risk to the economy from the trade war – and the stronger U.S. dollar," warned Seema Shah, chief strategist at Principal Global Investors in London."The Federal Reserve will now be under severe pressure to cut policy rates again at the September meeting to offset the downside impact.

Trump has measured himself by the success of the stock market, tweeting about its record levels during his administration. He has also lambasted Federal Reserve Chairman Jerome Powell for not cutting interest rates more aggressively in order to support the market. The latest salvos between Beijing and Washington have increased fears about a further slowdown of the already fragile global economy.After the Federal Reserve last week cut interest rates for the first time in over a decade, traders of interest-rate futures are pricing in about a one-in-three chance of a half-point rate cut in September, up from less than a 2per cent chance for such a large reduction seen on Friday.For a graphic on S&P 500 correction length, click https://tmsnrt.

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