Stock indexes around the world fell for a fourth day in a row on Thursday, but Wall Street pared its losses after comments from President Donald Trump about U.S.-China trade talks a day before the United States was due to raise tariffs on Chinese goods.
Trump said he had received a “beautiful letter” from Chinese President Xi Jinping asking that they work together to “get something done” as negotiations between the world’s two biggest economies continued in Washington.
Oil prices also pared losses while U.S. Treasury yields rose after touching near six-week lows. The dollar was still down against Japan’s yen as investors sought a safe haven currency, but it too regained some ground.
Earlier in the day China had asked the United States to meet it halfway in the hope of staving off a tariff hike on $200 billion of Chinese goods to 25 per cent from 10 per cent at 12:01 a.m ET on Friday.
“What the market fears deep down is an all-out trade war with no hope for resolution,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Trading today is telling me that the expectation for a trade deal is now that it’s likely to happen a bit sooner than months away or never,” he said.
The Dow Jones Industrial Average fell 139.65 points, or 0.54 per cent, to 25,827.68, the S&P 500 lost 8.76 points, or 0.30 per cent, to 2,870.66 and the Nasdaq Composite dropped 32.73 points, or 0.41 per cent, to 7,910.59.
In Toronto, the S&P/TSX composite index dipped 75.65 points, or 0.46 per cent, to 16,321.75.
Marijuana producers pushed health care stocks down by 2.4 per cent with Cronos Group Inc. and Canntrust Holdings Inc. falling 8.1 per cent and 4.2 per cent, respectively.
Heavyweight financial stocks lost 0.5 per cent, while the energy sector finished down 0.1 per cent.
The pan-European STOXX 600 index lost 1.65 per cent and MSCI’s gauge of stocks across the globe shed 0.89 per cent.
Previously Beijing said it would retaliate if the tariff hike is implements while Trump had insisted China “broke the deal.”
“Investors are worried about the clash of the titans,” said Joseph Quinlan head of market strategy for Merrill and Bank of America Private Bank in New York.
“It’s the knock-on effect on the rest of the world in terms of potential disruptions to global supply chains, the decline in investor confidence, business confidence and consumer confidence. And we’re getting closer to striking midnight.”
U.S. Treasury yields came off their session lows partly due to Trump’s latest trade comments but also because traders were preparing for a bond auction.
Benchmark 10-year notes last rose 8/32 in price to yield 2.4547 per cent, from 2.483 per cent late on Wednesday.
In currencies, the yen had surged to a three-month high against the dollar and the Swiss franc was at a one-month high as investors, eyeing escalating trade conflict, sought out the safe currencies.
The greenback also eased some declines. It was last down 0.4 per cent against the yen.
The dollar index fell 0.26 per cent, with the euro up 0.3 per cent to $1.1225.
Spot gold added 0.3 per cent to $1,284.71 an ounce.
Brent oil futures settled slightly higher on Thursday, rebounding from a drop after U.S. President Donald Trump revived investor hopes that the United States might not raise tariffs on Chinese imports, a step that could hit economic growth and crimp oil demand.
The trade dispute between the world’s two biggest economies and a sharp drop in global equity markets has hit oil prices, outweighing geopolitical tensions and supply cuts that have lowered global supplies from Latin America, Africa and the Middle East.
Brent settled 2 cents higher at $70.39 a barrel, rebounding from a session low of $69.40 a barrel. U.S. West Texas Intermediate (WTI) crude futures settled down 42 cents at $61.70 per barrel.
Prices bounced off session lows after Trump said he received a “beautiful letter” from Chinese President Xi Jinping. Trump quoted the letter as saying: “Let’s work together let’s see if we can get something done.”
The letter fed investor hopes Washington and Beijing might clinch a trade deal, said Bob Yawger, director of energy futures at Mizuho in New York.
Reuters