Traders work on the floor of the New York Stock Exchange in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

U.S. Stocks Extend Slide as Trade Tensions Simmer: Markets Wrap

(Bloomberg) --

U.S. stocks fell for a third day as an escalation in trade tensions prompted investors to question whether China and America will make progress as talks resume this week. The dollar rose and Treasuries fell.

The S&P 500 swung between gains and losses for much of the day as markets sought a measure of calm after the White House suggested a deal was still possible even as both sides threatened to raise tariffs as soon as Friday. Stocks had swooned 2 percent to start the week as trade tensions escalated. A late drop in Intel helped to weigh on tech shares.

“Volatility in the markets is really headline driven, particularly around the fluid conversations between the U.S. And China,” said Charlie Ripley, a senior investment strategist for Allianz Investment Management. “We’ll have to see how this thing plays out at the end of the week here, but we would continue to expect this environment as long as the headlines are going back-and-forth.”

U.S. Stocks Extend Slide as Trade Tensions Simmer: Markets Wrap

Beijing’s top trade negotiator, Liu He, is traveling to the U.S. on Thursday and Friday for the high-stakes talks. U.S. officials have said Chinese negotiators reneged in the past week on provisions in a draft deal the U.S. considered settled. The developments raise the prospect that talks between the U.S. and China to resolve their trade war could collapse entirely.

An escalation of Trump’s rhetoric on trade in the past few days appears to have caught global equity markets off-guard. Many had been testing record highs, seemingly priced to perfection on the assumption a deal between the U.S. and China would get done. The likes of JPMorgan boss Jamie Dimon still put the odds of that at 80 percent, and the S&P 500 has only fallen to levels seen a month ago.

Elsewhere, the yuan edged lower as data showed Chinese exports unexpectedly fell in April and imports rose. The New Zealand dollar slumped more than 1 percent as the central bank cut interest rates, though it later pared most of the drop.

In emerging markets, the lira extended losses against the dollar amid the fallout from Turkey’s decision to re-run municipal elections in Istanbul. The South African rand strengthened as the country headed to the polls for a national election.

Here are some notable events coming up:

  • The U.S. releases trade data Thursday.
  • South Africa holds national elections Wednesday.
  • China reports on inflation Thursday. The U.S. releases the April CPI report Friday.

These are the main moves in markets:

Stocks

  • The S&P 500 Index fell 0.2 percent as of 4:07 p.m. New York time, the Nasdaq Composite Index dropped 0.3 percent and the Dow Jones Industrial Average added less than 0.1 percent.
  • The Stoxx Europe 600 gained 0.2 percent.
  • The MSCI Emerging Market Index dropped 0.7 percent.
  • The MSCI Asia Pacific Index slumped 1.1 percent.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.2 percent, higher for a third straight day.
  • The euro was little changed at $1.1191, while the yen strengthened 0.2 percent to 110.13 per dollar, the fourth consecutive daily increase.
  • The British pound weakened 0.5 percent to $1.3008, the third straight decline.
  • The MSCI Emerging Markets Currency Index eased 0.1 percent.

Bonds

  • The yield on 10-year Treasuries rose two basis points to 2.48 percent, the first decline in four days.
  • Germany’s 10-year yield fell less than one basis point to negative 0.05 percent.

Commodities

  • West Texas Intermediate rose 0.9 percent to $61.92 a barrel.
  • Gold declined 0.3 percent to $1,281.25 an ounce.
  • The Bloomberg Commodity Index was little changed.

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