NEW YORK: U.S. stock indexes closed lower while the dollar edged higher on Monday, as investors appeared to need some convincing the United States and China would reach a trade agreement and weaker-than-expected construction data did not help their mood.
Oil futures settled higher after OPEC ally Russia said it would ramp up supply cuts and oil traders also cited U.S.-China deal hopes though equity declines dampened gains. [O/R]
U.S. President Donald Trump and Chinese President Xi Jinping might seal a trade deal around March 27, given progress in trade talks, the Wall Street Journal reported on Sunday.
Washington and Beijing have imposed tit-for-tat tariffs on billions of dollars worth of goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.
A source briefed on the negotiations told Reuters the countries appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods.
But while the reports had pushed up shares in Europe and Asia, Wall Street's major indexes could not maintain a rally. While some investors were waiting for more concrete details of a trade deal, others said it made sense to take some profits after a strong start to the year.
"Now that a deal looks like it's in the finishing stages you're seeing people take profits," said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
By Friday's session close the S&P had rallied 11.8 percent year-to-date and was just 4.3 percent below its record closing high reached in late September.
U.S. Commerce Department data helped to sour the mood as it showed construction spending fell unexpectedly in December as investment in private and public projects dropped.
The Dow Jones Industrial Average fell 205.79 points, or 0.79 percent, to 25,820.53, the S&P 500 lost 10.78 points, or 0.38 percent, to 2,792.91 and the Nasdaq Composite dropped 17.79 points, or 0.23 percent, to 7,577.57.
The pan-European STOXX 600 index rose 0.23 percent and MSCI's gauge of stocks across the globe shed 0.19 percent.
Treasury yields fell on Monday as the market retraced a counterintuitive move higher on Friday in spite of soft U.S. manufacturing, personal income and spending data.
"The rally in (Treasury prices) occurred absent a new obvious fundamental driver, and likely partially reflected a slight retracement from Friday’s sell-off, which itself occurred despite weak economic data on the day," said Jonathan Hill, U.S. rates strategist at BMO Capital Markets.
The dollar rose against a basket of major currencies on traders' bets China and the United States would end their trade battle. The greenback gained for a fourth straight day, helped by the rise in U.S. bond yields with benchmark 10-year yields US10YT=RR hitting one-month peaks last week. [FRX/]
The dollar index rose 0.08 percent, with the euro down 0.29 percent to $1.1341.
Oil futures gained support on news Russia, the biggest non-member ally of the Organization of the Petroleum Exporting Countries, planned to speed up crude output cuts this month, Energy Minister Alexander Novak said.
Brent futures settled up 0.92 percent at $65.67 per barrel while U.S. crude settled up 1.42 percent at $56.59 per barrel.
In precious metals, gold dipped to its lowest level in more than five weeks as the dollar rose while platinum shed 2.2 percent as investors took profits from a recent rally.
Spot gold dropped 0.5 percent to $1,287.42 an ounce.
Meanwhile European shares hit five-month highs on Monday with cyclicaloutperforming defensives, helped by hopes over a deal to end the U.S.-Sino trade war.
The FTSE 100 ended 0.4 percent higher and the FTSE 250 closed 0.1 percent higher and clung to its four-month high hit in the last session.
Financial stocks gained after the Wall Street Journal reported on Sunday that U.S. President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around March 27, raising hopes of an end to the protracted dispute.
"With all this positivity comes the risk that the market is buying on this rumour mill and is becoming more exposed should the good news not materialise. March could well come in like a lion and go out like a lamb," said Markets.com analyst Neil Wilson.
Spreadex analyst Connor Campbell suggested investors were wary of the latest update on trade talks, adding they were "perhaps sick of speculation and rather more keen to see some actual action."
Data showed activity in Britain's construction industry fell for the first time in almost a year last month amid Brexit uncertainty and a slowdown in the housing market.
This softened sterling and helped dollar earners such as AstraZeneca and spirits company Diageo to be among the top boosts to the main bourse.
Property website operator Rightmove also jumped 5.1 percent on its best day in more than two-and-a-half years after bullish comments from JP Morgan.
British Airways owner IAG dropped 4.8 percent on its worst day in more than a year after it forecast 2019 free cash flow to be lower than last year.
Ted Baker, which slumped 5 percent in early deals, recovered to add 4.8 percent as Ray Kelvin, the retailer's founder and top boss, quit following allegations of misconduct relating to his habit of hugging business colleagues.
"Ted Baker has grown steadily and has become a global brand and we do not see any change to the Group's long-term prospects," Liberum analysts wrote.
Daily Mail and General Trust rose 4.5 percent, its biggest intraday gain since late June, after plans to return all its shares in Euromoney Institutional Investor and 200 million pounds in cash to eligible shareholders.
Euromoney shares shed 4.6 percent.
Speciality chemical company Synthomer slipped 8.1 percent on the mid-caps after its full-year report, but losses were largely offset as drugmaker Indivior surged 7.5 percent in a no-news move.
Vietnam and Singapore shares led gains in Southeast Asia on Monday, lifted by growing signs that the United States and China are close to striking a trade deal that could end a long-drawn tariff row.
The Wall Street Journal reported on Sunday that Washington could lift most or all of its tariffs on Beijing, while a summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen later this month.
Investors will now turn their focus to China's annual parliamentary meeting this week, which may unveil more stimulus measures to prop up its slowing economy, along with details on economic growth targets for the year.
Vietnam shares climbed 1.5 percent, buoyed by real estate and financial stocks. Vinhomes JSC firmed 2.4 percent, while Joint Stock Commercial Bank for Investment and Development of Vietnam advanced 2.3 percent.
Singapore shares closed 1 percent higher, boosted by financials and industrials. DBS Group Holdings Ltd, the country's biggest lender, gained 1.7 percent, while Jardine Strategic Holdings rose 1.8 percent.
Philippine shares snapped three sessions of losses, supported by consumer and financial stocks.
Annual inflation is forecast to have slowed to a one-year low of 4.0 percent in February, a Reuters poll showed, due to cheaper food and fuel prices, and a strong peso. Inflation was 4.4 percent in January, staying outside the central bank's target range of 2-4 percent since March last year.
Malaysian shares, which have been the region's worst performer so far this year, extended losses into a fifth session, shrugging off better-than-expected January trade data.
The country reported a trade surplus of 11.5 billion ringgit ($2.82 billion) for January, compared with the 10.4 billion ringgit registered in the previous month, driven largely by higher shipments of manufactured and mining goods.
Bank Negara Malaysia will likely keep its benchmark overnight rate at 3.25 percent at a policy review on Tuesday, a Reuters poll showed, even as consumer prices on an annual basis fell in January for the first time in nearly a decade.- Reuters
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