Stocks fall as US-China trade spat in focus; dollar edges higher

Oil rises ahead of OPEC; gold steadies

NEW YORK, June 18, (Agencies): Global stocks slid on Monday as investors focused on an escalating trade dispute between the United States and China, the world’s two largest economies.

Trade fears also pushed US longdated Treasury debt yields lower. US President Donald Trump on Friday announced tariffs on $50 billion of Chinese imports, starting on July 6.

China said it would retaliate immediately by suspending previous trade agreements with Trump’s administration and slapping duties on American exports, including crude oil.

The MSCI world equity index, which tracks shares in 47 countries, was last down 0.5 percent, after falling to its lowest point since June 1.

“The trade war is definitely on the front burner right now, and will continue to be in the absence of news catalysts and unless something substantially changes,” said Art Hogan, chief market strategist, B. Riley FBR in New York.

The Dow Jones Industrial Average fell 152.58 points, or 0.61 percent, to 24,937.9, the S&P 500 lost 6.53 points, or 0.23 percent, to 2,773.13 and the Nasdaq Composite added 1.06 points, or 0.01 percent, to 7,747.43.

On top of trade, a potentially destabilizing vote in German Chancellor Angela Merkel’s governing coalition partner over a migration plan weighed on the euro and put further pressure on European shares.

Germany’s DAX was down 1.3 percent while France’s CAC 40 declined 1 percent.

Crude oil futures reversed course and turned positive.

US crude rose 0.23 percent to $65.21 per barrel after earlier hitting a twomonth low of $63.59 and Brent was last at $74.68, up 1.69 percent after falling to a six-week low of $72.45.

The Organization of the Petroleum Exporting Countries, which is de facto led by Saudi Arabia, is due to meet in Vienna on June 22 to decide production policy. OPEC and some allies including Russia have been restricting output since the start of 2017.

US 10-and 30-year Treasury yields fell for a third consecutive session in generally thin volume, while those on two-year notes were steady, underscoring the Federal Reserve’s tightening monetary policy.

Ten-year notes last rose 3/32 in price to yield 2.915 percent, from 2.924 percent late on Friday while the 30-year bond last fell 1/32 in price to yield 3.0481 percent, from 3.047 percent late Friday.

The immediate fallout from the dispute was limited in currencies although the escalation appeared to encourage some risk aversion as the safe-haven Japanese yen recovered from three-week lows against the dollar.

Global trade anxiety spurred demand for the yen and the Swiss franc, while the euro remained under pressure due to concern about the dispute in Germany’s governing coalition and about the European Central Bank’s plan to hold interest rates into 2019. The dollar index rose 0.01 percent, with the euro up 0.03 percent to $1.1611. The Japanese yen strengthened 0.17 percent versus the greenback at 110.48 per dollar.

The Swiss franc notched 0.3 percent increases against the greenback and the euro at 0.9946 franc and 1.1539 euros, respectively.

US

The three major US stock indexes were trading lower on Monday, but came off session lows, as gains in energy shares eased fresh concerns over a possible trade war following China’s retaliation against US tariffs.

US President Donald Trump said last week he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, prompting a swift response from Beijing, which said it would slap duties on several American commodities.

Boeing, the single largest US exporter to China, fell nearly 1 percent, while construction equipment maker Caterpillar declined 1.4 percent.

Intel was the biggest drag on the S&P 500 and the Nasdaq on China tariff concerns and a downgrade by Northland Securities. A host of other chipmakers, which depend on China for a larger part of their revenues, also slipped.

Chevron Corp rose nearly 2 percent and was the top gainer on the Dow Jones, while Exxon Mobil gained 0.6 percent.

The energy index rose 1.5 percent, with 30 of its 31 constituents posting gains.

At 12:23 p.m. ET, the Dow Jones Industrial Average was down 162.83 points, or 0.65 percent, at 24,927.65, on track for a fourth straight session of losses. The S&P 500 was down 11.39 points, or 0.41 percent, at 2,768.27 and the Nasdaq Composite was down 18.20 points, or 0.23 percent, at 7,728.18.

The consumer staples index fell 1.7 percent, with tobacco giant Philip Morris down 3.2 percent. Tobacco is among the 545 US goods that China will impose tariffs on from July 6.

The S&P financial index was down 0.3 percent after yield on the US 10-year note slipped.

Declining issues outnumbered advancers on the NYSE for a 1.23-to-1 ratio on the downside, and for a 1.42-to-1 ratio on the Nasdaq.

The S&P 500 index showed 16 new 52-week highs and 4 new lows, while the Nasdaq recorded 131 new highs and 35 new lows.

UK

Britain’s top stock index dipped on Monday as trade tensions between the United States and China kept the pressure on equity markets across Europe, weighing on multinational companies.

The FTSE 100 fell 0.03 percent to its lowest since May 30 but substantially outperformed other European stock markets. Germany’s DAX - home to big autos stocks on the trade dispute’s front line — sank 1.4 percent while the STOXX 600 fell 0.8 percent.

Strong energy stocks underpinned the FTSE 100, while a weaker pound also boosted the index’s mainly exporting companies.

US President Donald Trump announced tariffs on $50 billion of Chinese imports on Friday, laying out a list of more than 800 imports including cars that would be subject to a 25 percent tariff starting on July 6.

China said it would respond with tariffs “of the same scale and strength” and that any previous trade deals with Trump were “invalid.”

Multinational consumer stocks, vulnerable to higher barriers to trade, were the worst performing, with heavyweights Diageo, Reckitt Benckiser and British American Tobacco down.

Oil stocks opened lower but jumped into positive territory as crude prices snapped back ahead of Friday’s OPEC meeting, expected to result in production increases.

Crude was falling earlier after China threatened duties on American oil imports.

Oil majors BP and Royal Dutch Shell turned from the biggest drag to the biggest boost to the index, rising 1.2 to 1.3 percent by the close.

Europe

World stock markets faltered Monday as traders eyed looming trade wars and worried about EU rifts over migration.

In Europe, investors were also looking ahead to Tuesday, when French President Emmanuel Macron heads to Germany for talks with Chancellor Angela Merkel.

Merkel and Macron both agree on the need for a Europe-wide response to migrants, and are hoping to hammer out a policy acceptable to all member states that would ease the burden on Italy, Greece and other main entry points.

Hardliners in Merkel’s conservative bloc meanwhile gave her a two-week ultimatum to tighten asylum rules or risk pitching Germany into a political crisis.

With traders fleeing to safer assets, the yen rose against the dollar.

Brent crude meanwhile rebounded after slumping last week, as investors fret over Russia and Saudi Arabia’s expected agreement to ramp up output at an OPEC meeting that starts Friday.

The two major producers have kept a ceiling in place since late 2016, which has helped ease a supply glut and lift prices from multi-year lows.

Benjamin Lu, a commodities analyst at Phillip Futures Singapore, said crude may soon be weighed down by trade war fears.

London — FTSE 100: FLAT at 7,631.33 points (close)

Frankfurt — DAX 30: DOWN 1.4 percent at 12,834.11 (close)

Paris — CAC 40: DOWN 0.9 percent at 5,450.48 (close)

Euro Stoxx 50: DOWN 1.1 percent at 3,466.65.

Asia

Fresh fears of a trade war between the world’s top two economies sent most Asian markets tumbling on Monday after the United States and China imposed tit-for-tat tariffs on billions of dollars of imports.

Tokyo ended 0.8 percent down, while Singapore sank more than one percent, Seoul dropped 1.3 percent and Manila tumbled 2.5 percent. Wellington and Bangkok were both down but Sydney eked out a 0.2 percent gain.

Hong Kong and Shanghai were closed for public holidays.

“Many folks will tell you this isn’t a trade war. But when one side whacks a bunch of tariffs and the other side retaliates with its own set of tariffs against the other side, that looks very much to me like the battle has been joined,” said Greg McKenna, chief market strategist at AxiTrader. Key figures Tokyo — Nikkei 225: DOWN 0.8 percent at 22,680.33 (close)

London — FTSE 100: UP 0.1 percent at 7,638.09

Hong Kong — Hang Seng: Closed for a public holiday

Shanghai — Composite: Closed for a public holiday.

Oil

Oil prices rose on Monday ahead of an OPEC meeting this week and as investors assessed the impact of a trade dispute between the United States and China. US light crude oil hit a twomonth low of $63.59 a barrel but then recovered strongly to trade at $65.40, up 34 cents, by 1350 GMT. Brent to a high of $74.59 a barrel and was trading at $74.50, up $1.06, by 1350 GMT.

Brent hit a 3-1/2-year high above $80 a barrel in May but has since fallen on reports that top suppliers Saudi Arabia and Russia will increase production.

“Oil prices are reversing this morning’s bout of weakness as bottom pickers enter the fray ahead of this week’s crucial OPEC/non-OPEC meeting,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

The Organization of the Petroleum Exporting Countries, de facto led by Saudi Arabia, and some allies including Russia have been withholding output since the start of 2017.

Gold

Gold on Monday held close to 5-1/2 month lows, with a strong dollar offsetting the impact on prices of an escalating trade dispute between the United States and China.

The stronger dollar dampens demand for gold by making it;costlier for buyers holding other currencies, while geopolitical;uncertainty fuels interest in bullion as a safe investment.

Spot gold was flat at $1,278.71 an ounce at 1434 GMT, while US gold futures for August delivery were 0.2;percent higher at $1,281.20 an ounce.