Global stocks subdued by trade fears; US dollar slips

Oil falls as OPEC nears deal; gold hits 6-month low

NEW YORK, June 21, (Agencies): Stocks around the world fell on Thursday and the US dollar slipped from a peak as investors flocked to bonds after weak economic data and on worries about a US-China trade war.

Oil futures were lower before an OPEC meeting expected to increase the world’s supply of crude and after a report of a large stockpile draw in the United States.

The dollar fell from an 11-month high against a basket of major currencies as the Philadelphia Federal Reserve’s gauge of US Mid-Atlantic business activity fell to a near 1-1/2 year low.

US equity investors made cautious bets on Thursday after European automakers’ statements about the negative impact of international trade tension.

The Dow Jones Industrial Average fell 163.9 points, or 0.66 percent, to 24,493.9, the S&P 500 lost 13.5 points, or 0.49 percent, to 2,753.82 and the Nasdaq Composite dropped 41.94 points, or 0.54 percent, to 7,739.58.

The pan-European FTSEurofirst 300 index lost 0.91 percent and MSCI’s gauge of stocks across the globe shed 0.53 percent.

However, Argentina’s main stock index rose 7.6 percent, putting it on track for its biggest one-day percentage gain since August 2017.

Index provider MSCI said late Wednesday it would reclassify Argentina and Saudi Arabia as emerging market countries next year, broadening the investor base for both countries.

Saudi Arabia’s MSCI index rose 0.5 percent.

In US Treasuries, benchmark 10year notes last rose 5/32 in price to yield 2.9095 percent, from 2.928 percent late Wednesday. The 30-year bond last rose 7/32 in price to yield 3.0528 percent, from 3.064 percent late Wednesday.

This was partly due to the ongoing US-China trade battle, which triggered German carmaker Daimler to cut its earnings forecast.

Italian stocks and bonds also suffered as two euroskeptics were given key parliamentary finance roles by the country’s new coalition government..

The dollar index fell 0.19 percent, with the euro up 0.29 percent to $1.1604.

The Japanese yen strengthened 0.30 percent versus the greenback at 110.06 per dollar.

Sterling was last trading at $1.3248, up 0.58 percent on the day after the Bank of England’s chief economist unexpectedly joined a minority of the Bank’s policymakers calling for an interest rate hike at its latest meeting.

US

US stocks slipped on Thursday as oil prices slid, industrials dropped on worries over US-China trade spat and Amazon led a decline in online retailers after the Supreme Court let states force the companies to collect sales tax.

Amazon dropped as much as 1.9 percent, before paring losses to trade down 1 percent. Wayfair, Overstock. com, Etsy and Ebay fell between 1.9 percent and 5.2 percent.

Another big drag was Intel, which retreated 2.4 percent after Chief Executive Officer Brian Krzanich resigned following a probe that revealed a past consensual relationship with an employee violated company policy.

Big US manufacturers extended their slide after a state-controlled Chinese tabloid said Beijing could target members of the Dow Jones Industrial Average if President Donald Trump kept exacerbating tensions over trade.

Caterpillar and Boeing were both down 1.3 percent, with the S&P industrials 0.9 percent slide weighing the most on the markets.

The 30-member Dow index gave up its year-to-date gains earlier this week as the trade rhetoric escalated and is on pace to extend a seven-session losing streak.

At 12:43 pm ET, the Dow Jones Industrial Average was down 184.53 points, or 0.75 percent, at 24,473.27. The S&P 500 was down 16.01 points, or 0.58 percent, at 2,751.31 and the Nasdaq Composite fell 58.37 points, or 0.75 percent, to 7,723.14.

Seven of the 11 main S&P sectors were trading lower, with the S&P energy, the best performing sector in the last three months, down 1.7 percent as oil prices slipped after crude producers appeared to be nearing a deal to increase production at an OPEC meeting in Vienna. [O/R]

UK

Britain’s top share index fell on Thursday as sterling bounced from seven-month lows following a Bank of England policy vote that bolstered expectations of a rate hike in August.

As widely expected, the BoE kept rates unchanged but its chief economist unexpectedly joined the minority of policymakers calling for a hike.

Its Monetary Policy Committee (MPC) voted 6-3 to keep rates at 0.5 percent. Economists in a Reuters poll had said they expected a continued 7-2 split.

The surprise pushed sterling higher after an earlier drop. That in turn sent the FTSE 100 down and the export-oriented index closed 0.9 percent lower.

“The housebuilders helped drag the FTSE 100 lower today, with a surprise hawkish shift from the BoE driving fears of rising mortgage costs and falling affordability”, wrote Joshua Mahony, a market analyst at IG.

Barratt Development and Persimmon both fell 3.7 percent, while Taylor Wimpey lost 3.1 percent.

Financials and energy stocks weighed on the FTSE as expectations of an OPEC deal to raise output sent oil prices tumbling.

Royal Dutch Shell fell 1.1 percent and BP 0.9 percent.

Sky rose for a second day, up 1.8 percent at a two-month high, after Disney raised its offer for the bulk of TwentyFirst Century Fox’s entertainment assets, including a 39 percent stake in the UKbased pay-TV company.

Europe

European shares ended the day deep into the red after an early bounced on Thursday, shaken by the appointment of eurosceptics at key positions in the Italian parliament and after German carmaker Daimler warned higher tariffs would hit profits.

The autos sector .SXAP fell 3.5 percent, its biggest loss in about two years, while the pan-European STOXX 600 tumbled 0.9 percent as fears about the ongoing US-China trade dispute lingered on.

Daimler became one of the biggest global companies to cut its guidance on trade tensions, warning profits would be hit in part by Chinese tariffs on car imports from the United States.

Daimler (DAIGn.DE) shares fell 4.3 percent to their lowest in nearly two years.

Some analysts were sceptical of Daimlers timing, saying the profit warning may be more driven by internal pressures than the external trade environment.

But UBS analysts said they expected consensus earnings estimate downgrades of 5 to 7 percent for the carmaker.

Volkswagen (VOWG_p.DE) fell 3.1 percent and BMW (BMWG.DE) 2.9 percent while Germany’s DAX .GDAXI, which counts many heavy exporters among its constituents, underperformed the STOXX 600 with a 1.4 percent slump.

Asia

Asian markets mostly fell on Thursday, with Shanghai and Hong Kong leading the way, with an early rally overcome by simmering concerns about a possible China-US trade war.

Worry over the world economy also sent the dollar up against high-yielding currencies as traders sought out safer bets.

Hong Kong and Shanghai – the two were the worst hit by Tuesday’s selling frenzy – were the big losers among major markets.

Hong Kong sank 1.4 percent and Shanghai finished 1.4 percent lower.

Singapore shed 0.3 percent and Seoul lost 1.1 percent, with Manila and Bangkok also more than one percent lower.

However, Tokyo ended 0.6 percent higher and Sydney gained one percent.

Wellington also jumped more than one percent after data showed that while New Zealand’s economy cooled in January-March, interest rates are not expected to rise in the near term.

Stephen Innes, head of Asia-Pacific trading at OANDA, said markets were “unsure if we’re in the calm after the storm, the lull between storms or even in the eye of the hurricane”. n Key figure Tokyo - Nikkei 225: UP 0.6 percent at 22,693.04 (close)

Hong Kong - Hang Seng: DOWN 1.4 percent at 29,296.05 (close)

Shanghai - Composite: DOWN 1.4 percent at 2,875.81 (close)

Oil

Oil prices fell on Thursday as crude exporters in OPEC appeared to be nearing a deal to increase production.

Benchmark Brent crude dropped $1.80 a barrel, or 2.4 percent, to a low of $72.94 before recovering a little to $73.30, down $1.44, by 1358 GMT. US light crude was 71 cents lower at $65.00.

Brent reached a 3-1/2-year high above $80 a barrel last month but has fallen steadily in recent weeks as Saudi Arabia, de facto leader of OPEC, has signalled it intends to raise production to stabilise prices.

Gold

Gold prices sank to six-month lows on Thursday as investors sold holdings in the physical market and the dollar climbed due to expectations of higher interest rates in the United States.

Spot gold was down 0.2 percent at $1,265.4 an ounce at 1501 GMT but off a low of $1,261.36, its weakest level since Dec 20.

It has lost more than 7 percent since an April high above $1,365 an ounce. US gold futures were down 0.5 percent at $1,267.3 an ounce.

Holdings of the largest gold-backed exchange traded fund (ETF), the New York-listed SPDR Gold Trust have fallen nearly five percent to 26.645 million ounces since late April.

That trend is reflected in other US based ETFs.

“Uncertainty would normally fuel demand for gold as a safe haven, which we would see in the physically backed products, but instead we are seeing outflows from the US products,” said Julius Baer analyst Carsten Menke.

“From the perspective of a US investor, focused on the domestic market and economy, the threat from trade tensions is much lower than in Europe. US domestic consumption is a major driver of growth and there isn’t a problem there.”

That, Menke said, is why the Russell 2000 equity index, which comprises of small US-listed companies, and theNasdaq index of technology firms, are at record highs.

Meanwhile higher US interest rates and the prospect of further rises later this year have seen the dollar against a basket of other major currencies climb to its highest since last July.