Saturday , October 20 2018

US stocks pare drop, Treasuries rise, dollar surges on trade bets

Bloomberg

US stocks pared declines, while Treasuries rose as investors assessed the possible fallout from President Donald Trump’s push to implement punitive trade tariffs on some products. The dollar turned higher versus major peers.
The S&P 500 Index remained on track for the first drop in four days, though overnight declines sparked by the resignation free-trade proponent Gary Cohn and news the president intends to clamp down on China have eased. Domestically-focussed small caps turned higher, while the Dow Jones Industrial Average fell. Consumer stocks that stand to suffer from any escalation of a trade rift bore the brunt of selling, with carmakers and industrial companies pacing declines.
While the imposition of severe levies on steel and aluminum may come as soon as this week, speculation remains that the tariffs won’t spark a broader trade conflagration. The European Union has said it will retaliate in kind, while China has so far remained largely quiet. At the same time, Republican leaders in Congress have urged Trump to target only specific items and countries, adding to hope that a broader crackdown on trade will be avoided.
Trading on US exchanges was light, with S&P 500 volumes about 10 percent below the 30-day average as the East Coast prepares for a storm that’s already grounded almost 2,000 flights and could cut power.
Investors also have their sights fixed on upcoming central bank decisions in Europe and Japan.
The Chinese People’s Political Consultative Conference runs through March 15 and overlaps with the National People’s Congress meetings in Beijing, through March 20. The ECB isn’t expected to change policy on Thursday, but the Governing Council may discuss a change to pave the way for the end of quantitative easing. BOJ monetary policy decision and briefing on Friday.
The S&P 500 Index dropped 0.5 percent in New York. The Dow Jones Industrial Average was down 177 points to 24,706. The Russell 2000 Index gained 0.1 percent, its fourth straight rise. The Stoxx Europe 600 Index rose 0.3 percent, third gain in a row. The MSCI Emerging Market Index dipped 0.6 percent.
The Bloomberg Dollar Spot Index rose 0.2 percent. The euro declined less than 0.1 percent to $1.2387. The British pound fell 0.1 percent to $1.3882, the first retreat in a week. The Japanese yen was steady at 106.13 per dollar. The MSCI Emerging Markets Currency Index increased 0.1 percent to the highest in more than a week.
The yield on 10-year Treasuries declined two basis points to 2.87 percent. Germany’s 10-year yield decreased two basis points to 0.66 percent. Britain’s 10-year yield fell two basis points to 1.503 percent.
West Texas Intermediate crude slid 1.3 percent to $62.38 a barrel. Gold slipped 0.2 percent to $1,331.88 an ounce.

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