Stocks fell and bonds gained as trade tensions between the U.S. and China escalated, while investors weighed diverging monetary policies from the Federal Reserve and European Central Bank.
Futures on the S&P 500 dropped and the Stoxx Europe 600 Index edged lower, erasing an earlier advance, after a mixed session in Asia. Treasury yields dipped and Italian debt led a rally in European bonds triggered by the ECB ruling out a rise in interest rates until the second half of 2019, a day after the Federal Reserve said American policy makers will continue with gradual hikes. The euro gained and the dollar was steady.
As well as weighing different policy paths, traders are also bracing for the expected approval of U.S. import tariffs on $50-billion of Chinese goods, in a move that China has said it will respond to in kind. Stocks in China slipped, but Japanese equities rose amid a weaker yen as the Bank of Japan downgraded its assessment of inflation. Latest reports suggested the U.S. is preparing a second list of tariffs on Chinese goods worth as much as $100-billion.
Emerging markets remain under pressure as worries about an overhaul of Argentina’s central bank leadership saw a plunge in its currency. South Korea’s won and Thailand’s baht led declines Friday. Elsewhere, WTI crude slipped, though still on track for a weekly gain, as a halt in loading from two key ports in Libya offset concerns about a phase-out of supply limits by OPEC and allied producers.
Here are the main market moves:
Stocks
The Stoxx Europe 600 Index fell 0.2 per cent as of 9:52 a.m. London time. The U.K.’s FTSE 100 Index sank 0.5 per cent. Germany’s DAX Index rose 0.1 per cent. The MSCI Asia Pacific Index fell 0.2 per cent to 172.73. Futures on the S&P 500 Index sank 0.4 per cent.
Currencies
The Bloomberg Dollar Spot Index rose 0.1 per cent. The euro rose 0.2 per cent to $1.1593. The British pound increased 0.1 per cent to $1.3271. The Japanese yen advanced 0.1 per cent to 110.49 per dollar.
Bonds
The yield on 10-year Treasuries fell two basis points to 2.92 per cent. Germany’s 10-year yield fell four basis points to 0.39 per cent. Britain’s 10-year yield fell three basis points to 1.334 per cent. Italy’s 10-year yield fell 17 basis points to 2.57 per cent.
Commodities
West Texas Intermediate crude fell 0.3 per cent to $66.72 a barrel. Brent crude fell 0.6 per cent to $75.46 a barrel. Gold fell 0.2 per cent to $1,300.05 an ounce.
--With assistance from Cormac Mullen
Bloomberg