Global stocks retreat ahead of Trump-Xi meeting; dollar gains

Oil prices under pressure on Libyan output recovery

NEW YORK, April 3, (RTRS): Global equity markets eased on Monday as investors awaited the first meeting later this week between US President Donald Trump and Chinese President Xi Jinping, as the dollar gained amid a positive US backdrop of rising interest rates.

European shares touched a 16-month high before paring gains as they tracked Asian shares higher in the wake of upbeat manufacturing data out of Europe and China.

Shares on Wall Street fell in morning trading as investors assessed how Trump’s protectionist stance on trade will play out during meetings with Xi slated for Thursday and Friday.

Trump held out the possibility, in an interview published on Sunday by the Financial Times, of using trade as a lever to secure Chinese cooperation against North Korea.

“The market will be anxious and will be eager to glean whatever they get from those talks,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

“The market was a little taken aback by Trump’s comments recently about the meeting,” he said.

The pan-European FTSEurofirst 300 index lost 0.49 percent, shedding earlier gains, and MSCI’s gauge of stocks across the globe shed 0.39 percent.

German manufacturing growth hit almost a six-year high in March, Markit’s Purchasing Managers’ Index (PMI) showed. Manufacturing activity in France and Italy also rose, adding to signs of a pickup in the global economy.

On Wall Street, the Dow Jones Industrial Average fell 79.12 points, or 0.38 percent, to 20,584.1. The S&P 500 lost 11.29 points, or 0.48 percent, to 2,351.43 and the Nasdaq Composite dropped 27.46 points, or 0.46 percent, to 5,884.28.

The dollar rose amid investor expectations US rates will continue to rise this year, even as Federal Reserve officials have said the Fed is in no rush to tighten monetary policy.

US construction spending and manufacturing data were positive overall, affirming the economy’s steady improvement and helping lift the dollar. Construction spending grew 0.8 percent to $1.19 trillion, the highest since April 2006.

The dollar index rose 0.31 percent, with the euro unchanged at $1.0649.

The Japanese yen strengthened 0.34 percent versus the greenback at 111.01 per dollar, while sterling was last trading at $1.247, down 0.60 percent on the day.

Oil prices were under pressure as a rebound in Libyan oil output over the weekend offset upbeat economic data from Asia that suggested robust energy demand from the region.

Benchmark Brent futures eased by 8 cents to $53.45 a barrel. US West Texas Intermediate crude futures were down 10 cents at $50.50 a barrel.

Manufacturing data showed factories across much of Asia posted another month of solid growth in March.

The Bank of Japan’s “tankan” survey showed business sentiment improved, albeit slightly less than expected.

US

Wall Street fell on Monday after some US states accused President Donald Trump’s administration of illegally delaying certain energy efficiency standards, casting further doubt over the government’s ability to deliver on its promised reforms.

A coalition of US states and municipalities began legal action against Trump’s administration, saying its delay of energy efficiency standards for several consumer and commercial products violated federal law.

The move comes barely two weeks after the administration had to pull legislation to overhaul the US healthcare system.

Trump’s campaign promises to cut tax, ease regulations and spend more on infrastructure had driven Wall Street to record highs. However, after the administration’s recent legislative setbacks, investors are worried when and if these promises will be fulfilled.

Trump held out the possibility on Sunday of using trade as a lever to secure China’s cooperation against North Korea, in comments that appeared designed to pressure Chinese President Xi Jinping ahead of his first meeting with Trump later this week.

Investors are waiting to see if corporate reports in the impending earnings season justify the lofty valuations. The S&P 500 is trading at about 18 times earnings estimates for the next 12 months, above its long-term average of 15.

At 11:56 am ET (1556 GMT), the Dow Jones Industrial Average was down 108.03 points, or 0.52 percent, at 20,555.19, the S&P 500 was down 14.85 points, or 0.63 percent, at 2,347.87 and the Nasdaq Composite was down 35.62 points, or 0.6 percent, at 5,876.11.

The CBOE Volatility index, known as Wall Street’s ‘fear gauge’ was up at 13.34 points, on track to rise for the third straight trading day.

All 11 major S&P 500 sectors were lower, led by the financial index’s 1.3 percent drop.

“The banks faced issues like slowdown in commercial lending growth this quarter. Investors think that the banks have not done quite well this quarter,” said Stephen Biggar, an analyst with Argus Research.

Tesla shares gained as much as 5.7 percent to a record high after the electric car maker reported record firstquarter vehicle deliveries.

But, other automakers fell after reporting March sales that came in below market expectations. GM dropped 3.7 percent, Fiat Chrysler sank 5 percent, while Ford was off 2.4 percent.

Declining issues outnumbered advancers on the NYSE by 1,869 to 1,020. On the Nasdaq, 2,010 issues fell and 757 advanced.

The S&P 500 index showed 17 52week highs and five lows, while the Nasdaq recorded 69 highs and 22 lows.

Asia

Hong Kong stocks edged up on Monday morning, on track to break a two-day run of losses, with infrastructure-related stocks surging after Beijing announced plans to set up a special economic zone in the heavily polluted province of Hebei.

Mainland markets were closed for a holiday, and will resume trading on Wednesday.

The benchmark Hang Seng index had gained 0.4 percent to 24,205.59 points by 0612 GMT, while the Hong Kong China Enterprises Index edged up 0.24 percent, to 10,297.92.

Shares of China building materials maker BBMG Corp surged as much as 46 percent to its highest since May 2015, making it the top performer in Hong Kong. The company said in a statement it was not aware of any reason for the jump.

LongiTech Smart Energy Holding Ltd, a smart energy solution provider which also engages in public infrastructure construction, climbed as much as 70 percent to its highest since April 2015.

China VAST Industrial Urban Development and Tianjin Port Development Holdings Ltd rose 21 percent and 19 percent, respectively.

China will establish a new special economic zone in Hebei province in order to promote integration with the neighbouring cities of Beijing and Tianjin, the government announced on Saturday.

Kulun Energy Co Ltd rose 4.3 percent, to its highest since July 6, 2015, while China Shenhua Energy Co Ltd rose 1.3 percent.

China’s official Purchasing Managers’ Index (PMI) rose to 51.8 in March from the previous month’s 51.6, and was well above the 50-point mark that separates growth from contraction on a monthly basis. The reading was stronger than the 51.6 that economists had expected and the highest since April 2012.

Oil

Oil prices were under pressure on Monday as a rebound in Libyan oil output at the weekend weighed against upbeat economic data from Asia that pointed to strong energy demand from the region.

Benchmark Brent futures eased by 8 cents to $53.45 a barrel by 1356 GMT. US West Texas Intermediate crude futures were down 10 cents at $50.50 a barrel.

Libya’s Sharara oil field, the country’s largest, resumed production on Sunday after a week-long disruption. State-owned NOC lifted force majeure on loadings of Sharara crude on Monday, sources told Reuters.

The field was producing around 120,000 barrels per day (bpd) on Monday and about 220,000 bpd prior to the March 27 shutdown.

Adding to pressure on prices, energy services firm Baker Hughes said the US rig count rose by 10 to 662 last week, making the first quarter the strongest for rig additions since mid2011 and raising prospects for more US shale oil.

Rising supplies tempered data from Asia that suggested the region’s buoyant economy would ensure solid demand for energy.

Manufacturing data showed factories across much of Asia posted another month of solid growth in March.

Purchasing managers’ index (PMI) data from China showed its factories expanded for a ninth straight month in March, although the pace slipped as new export orders slowed.

Oil prices had rallied for three days last week, lifted by reduced Libyan output and helped by expectations that members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers such as Russia would extend production cuts beyond June.

But in a sign investors were more cautious about further price gains, hedge funds and money managers cut net long positions last week by 28,942 contracts to 372,756 lots in the week to March 28, the lowest since Nov. 29, data released by the InterContinental Exchange showed.

Gold

Gold prices rose on Monday despite a firmer dollar, but was trading in a tight range as the market sought more direction from key US economic data expected later in the week.

Spot gold was 0.23 percent higher at $1,245.71 per ounce at 1530 GMT, trading in the range between $1,253.52- $1,244.05.

“Gold is stuck between $1,238$1,260 with the risk to skewed to downside based on rising expected interest rates and failure to break higher which has left it vulnerable to profittaking in the short term,” said Ole Hansen, the head of commodity strategy at Saxo Bank.

Hansen said focus now turned to US payrolls data on Friday which could provide more clues on the direction of interest rates. Supporting gold was geopolitical tension sparked by US President Donald Trump who on Sunday held out the possibility of using trade as a lever to secure Chinese cooperation against North Korea.