Wall Street ‘flat’ as investors nervy ahead of Trump-Xi meet

European shares down following drop on Asian bourses

LONDON, April 4, (RTRS): European shares edged lower on Tuesday, after falls on Asian bourses, and low-risk government debt yields fell as political risks from a meeting between the US and Chinese leaders to the French presidential election kept investors on edge.

Wall Street also looked set to open in the red, according to index futures .

The dollar edged up against a basket of major currencies but lost half a percent against the safe-haven Japanese yen. Gold, another asset sought in uncertain times, hit a one-week high.

In emerging markets, the South African rand fell more than 1 percent against the dollar and bank shares fell after S&P Global cut the country’s credit rating to junk on Monday.

The pan-European STOXX 600 share index gave up early gains and was last down 0.1 percent, after falling from a 16-month high on Monday.

Britain’s FTSE 100 index, however, rose 0.4 percent.

Shares have hit record highs across the globe in recent months, partly in anticipation of US President Donald Trump cutting taxes, easing regulation and raising infrastructure spending in the world’s largest economy.

However, Trump’s struggles to push other legislation through Congress has led some to question whether he will be able to fully make good on his campaign pledges.

In Asia, automaker stocks, which helped pull Wall Street down on Monday after sub-par US car sales data, were the main drag on Tokyo shares on Tuesday; the Nikkei fell 0.9 percent to a 10-week low.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 percent, having hit a 21-month high last week.

The dollar inched up 0.1 percent against its currency basket but fell to as low 110.24 yen.

The euro fell 0.2 percent to $1.0650 and sterling fell 0.4 percent to $1.2432.

The Australian dollar was 0.7 percent weaker at $0.7546 after the central bank held rates steady at a record low 1.5 percent as expected, and said growth in household borrowing, largely for housing, was outpacing rises in household income.

US

US stocks were little changed on Tuesday, trading in a tight range, as investors fretted over the ability of President Donald Trump to deliver on his policy plans, and ahead of his potentially tense meeting with Chinese President Xi Jinping.

The industrial and material stocks got a boost after Trump said the US infrastructure bill may top $1 trillion and that his administration was working on a major “haircut” on the Dodd-Frank banking regulation, rekindling some of his campaign promises.

But, the gains were neither sufficient or last long enough to offset a drop in financials and technology stocks.

The market rally that was sparked by Trump’s pro-business policy plans has cooled of late, following legislative setbacks that led investors to question whether the president would be able to deliver on his promises.

Adding to investor nervousness is Trump’s upcoming meeting with Xi, one which the US president expects “will be a very difficult one,” according to his tweet last week. He has held out the possibility of using trade as a lever to secure China’s cooperation against North Korea at the Thursday-Friday meeting.

At 12:44 p.m. ET (1644 GMT), the Dow Jones Industrial Average was up 25.32 points, or 0.12 percent, at 20,675.53, the S&P 500 was down 1.25 points, or 0.05 percent, at 2,357.59 and the Nasdaq Composite was down 1.36 points, or 0.02 percent, at 5,893.32.

Of the 11 major S&P sectors, four were lower, two gained and the rest were little changed. The energy index was up 0.4 percent, helped by higher oil prices.

The biggest drag on the S&P and the Nasdaq was Nvidia , which dropped 5.6 percent to $102.24 after Pacific Crest downgraded the chipmaker’s stock.

Staples was the biggest percentage gainer on the S&P with a 10 percent gain. Reuters reported that the office supplies retailer was exploring a sale.

Declining issues outnumbered advancers on the NYSE by 1,542 to 1,277. On the Nasdaq, 1,489 issues fell and 1,242 advanced.

The S&P 500 index showed six 52week highs and six lows, while the Nasdaq recorded 29 highs and 34 lows.

UK

British shares outperformed European peers on Tuesday, helped by the energy and industrials sectors, while supermarket firms Sainsbury and Morrison fell on poor sales data.

The FTSE 100 ended up 0.5 percent, outperforming the more hesitant Europe-wide STOXX 600 index, which inched up 0.2 percent.

The British index was little changed after PMI data showed British construction growth slowed in March.

Precious metal miners Randgold Resources and Fresnillo were among the top gainers, up 1.6 to 2.8 percent, as gold prices hit a one-month high.

Distributor and outsourcer Bunzl rose 1.2 percent after it said it bought two safety workwear businesses: ML Kishigo in the United States and Neri in Italy.

Supermarkets Morrison and Sainsbury fell 2.8 percent and 2.2 percent respectively after Kantar Worldpanel data showed their sales struggled in the first quarter while discount competitors Aldi and Lidl performed strongly.

South Africa exposed stocks Investec and Old Mutual rose 0.6 percent and 0.1 percent respectively, recovering from earlier losses due to credit ratings agency S&P’s downgrade of the African country to sub-investment grade.

GKN, which makes engines and components for cars, was down 2 percent, tracking Europe-wide losses in the auto sector, fell 1 percent.

Among mid-caps, meanwhile, valve maker Rotork was up 4.4 percent and set for its best day in four months.

JP Morgan upgraded the firm, which is exposed to a recovery in oil and gas markets, to ‘overweight’, saying its earnings power had increased.

Europe

The muted start to the second quarter continued on Tuesday with European shares ending a choppy session slightly in positive territory as gains in oil-related stocks and miners more than offset weakness in the autos sector.

The pan-European STOXX 600 index ended up 0.2 percent, while the resources-heavy FTSE 100 outperformed and was up 0.5 percent.

“Heading into Q2 there’s a lot on the table. There’s a lot of currency risk going on at the moment, which is causing a bit of market uncertainty, especially in the FTSE and the Euro STOXX 50,” said John Moore, trader at Berkeley Capital, referring to Europe’s blue chip index.

Autos were the biggest sectoral losers, down 0.6 percent, with Schaeffler, Peugeot and Volkswagen leading the sector lower.

Figures for US sales of new vehicles in March at major carmakers came in below market expectations while investor worries over the outlook for diesel vehicles has cast a cloud over European auto stocks.

Banking stocks were also under the cosh, falling 0.4 percent. Spain’s Banco Popular extended its slide from the previous session, taking losses over the past two sessions to more than 11 percent after the lender announced a restatement on Monday and said that its CEO is to step down.

Oil stocks were among standout sectoral gainers, however, rising around 1 percent, rebounding from losses in the previous session as oil prices rose to a near one-month high on expectations of a drawdown in US crude and product inventories. Likewise, basic resources stocks rose 1.5 percent.

Asia

Asian stock markets were mostly lower on Tuesday after disappointing US car sales data contributed to a bleak day on Wall Street. Investors are cautiously awaiting President Donald Trump’s meeting with the Chinese president later this week.

Japan’s Nikkei 225 fell 0.9 percent to 18,810.25 as the yen gained against the US dollar. South Korea’s Kospi slipped 0.3 percent to 2,161.10. Australia’s S&P/ASX 200 fell 0.3 percent to 5,856.60. Southeast Asian shares were mixed. Markets in Hong Kong and Shanghai were closed for public holidays.

Automakers including Ford and General Motors reported disappointing sales for March in a sign that does not bode well for US consumer spending. US auto sales fell for a third straight month, by 1.6 percent to just over 1.55 million vehicles, as passenger car sales dropped. Analysts had expected a small increase.

Investors reduced their holdings of automakers following weak March sales reports. In Seoul, South Korea, Hyundai Motor’s stock dropped 2.9 percent while its smaller affiliate Kia Motors lost 1.4 percent. In Tokyo, Honda Motor’s stock fell 2.7 percent and Toyota Motor dropped 1 percent.

Shares in the troubled Japanese company sank 9 percent on Tuesday after national broadcaster NHK reported, citing an unidentified person, that the company may need extra financial support to cover its losses. Its US nuclear unit Westinghouse Electric filed for bankruptcy protection last week.

Oil prices rose on Tuesday as expectations of a drawdown in US crude and product inventories outweighed news of higher Libyan production.

Benchmark Brent crude oil was up 50 cents at $53.62 a barrel by 1350 GMT. US light crude was 35 cents higher at $50.59 a barrel.

Both benchmarks recovered from four-month lows last week on expectations that the Organization of the Petroleum Exporting Countries would manage to tighten supply by cutting production under a deal agreed at the end of last year.

Demand is picking up ahead of summer in key markets, including the United States, the world’s biggest oil consumer, where analysts forecast industry data this week will show a decline in oil inventories.

US crude stocks probably declined last week after rising for two consecutive weeks, and refined product inventories were also expected to have fallen, a Reuters survey showed.

Gold

Gold prices hit a one-month high on Tuesday, boosted by a lower dollar after US economic data persuaded investors to reassess the idea of an imminent Fed rate hike, while security concerns rose following a bomb blast in Russia the previous day.

Spot gold was up 0.2 percent at $1,255.9 an ounce by 1350 GMT after touching $1,261.15, its highest since February 27. US gold futures climbed 0.3 percent to $1,257.8.

The US Institute for Supply Management said its index of national factory activity fell to 57.2 in March from 57.7 in February, while automakers reported a 1.6 percent drop in US sales last month.

“The dollar’s gains could be coming to an end. It has been rising and that’s a headwind for the US economy,” said Marex Spectron analyst Guy Wolf.