NEW YORK, May 7 ― Wall Street's indexes and bond yields ended down but well above their session lows while oil futures settled higher as investors bet that US President Donald Trump's threats to raise tariffs on China would not materialise.
Trump tweeted on Sunday that the United States would raise tariffs on US$200 billion (RM829 billion) worth of Chinese goods this week, causing investors to seek safety and flee from risky assets. Yesterday, Trump sharply criticised China.
But as yesterday's session wore on, the initial shock from the threats appeared to wear off. US Treasury yields pared some of their declines.
Oil futures reversed course to settle slightly higher after a volatile day as rising tensions between the United States and Iran helped buoy prices. The futures had earlier touched a one-month low due to Trump's tweets.
In stocks, the S&P 500 closed down 0.4 per cent after falling as much as 1.6 per cent during the session.
“Investors are warming up to the idea that its more of a negotiation tactic than it is a petulant child screaming bloody murder,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
Fears about trade war escalation were also calmed somewhat by a statement from China's foreign ministry yesterday that a Chinese delegation was still preparing to go to United States for trade talks.
“Right now the contingent from China is still coming. If that changes, then the market narrative and the market reaction might also change,” said Nolte.
The Dow Jones Industrial Average fell 66.47 points, or 0.25 per cent, to 26,438.48, the S&P 500 lost 13.17 points, or 0.45 per cent, to 2,932.47 and the Nasdaq Composite dropped 40.71 points, or 0.5 per cent, to 8,123.29.
The pan-European STOXX 600 index lost 0.88 per cent and MSCI's gauge of stocks across the globe shed 0.65 per cent. In comparison, the Shanghai SE Composite had closed up 5.6 per cent in its biggest one-day percentage drop since February 2016.
Bond prices, oil futures rise
The US dollar slipped to a five-week low against the yen and fell versus other currencies yesterday after Trump said he would sharply raise tariffs on Chinese goods this week, risking the derailment of the trade talks between Washington and Beijing.
Volume, though, was thin overall with London and Tokyo markets closed for holidays.
The dollar weakened 0.30 per cent versus the yen to 110.89 per dollar. The dollar index rose 0.01 per cent, with the euro unchanged at US$1.12.
Benchmark 10-year Treasury notes last rose 9/32 in price to yield 2.4998 per cent, from 2.53 per cent late on Friday.
US West Texas Intermediate (WTI) crude futures settled up 31 cents, or 0.5 per cent, at US$62.25 a barrel. Brent crude futures settled up 39 cents, or 0.55 per cent, at US$71.24 a barrel. ― Reuters
