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Stocks falter on trade uncertainty; sterling gains

Published 2019-12-05, 11:49 a/m
© Reuters.  Stocks falter on trade uncertainty; sterling gains
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* Wall Street falls on renewed doubts about a trade deal

* Investors weary amid mixed messages from Trump

* Dollar retreats on recent poor U.S. economic data

* Pound romps higher on hopes election will allow smooth Brexit

By Herbert Lash

NEW YORK, Dec 5 (Reuters) - The dollar slid and global equity markets faltered on Thursday as investors dismissed solid economic data and again fretted about the likelihood of a "phase one" trade deal before a new round of U.S. tariffs on Chinese imports begins in 10 days.

U.S. Treasury yields rose on reports indicating a resilient economy, including a fall in weekly jobless claims and a decline in the U.S. trade deficit, which suggested trade could contribute to growth in the fourth quarter.

But gold edged higher as mixed messages on the U.S-China trade negotiations stirred uncertainty. Investors have struggled to understand U.S. President Donald Trump's position on trade during his London visit for the NATO summit. Trump said talks with China were going "very well" at one meeting while warning at another that a deal may come only after U.S. elections in November 2020.

In addition to the conflicting statements on trade, and with impeachment hearings in Congress, some investors see Trump as perhaps being weakened slightly, said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

U.S. tariffs on about $156 billion of Chinese imports that are set to begin Dec. 15, and Trump suggesting he would slap tariffs on French imports, have created uncertainty, he said.

"If the (China) tariffs go into effect, and if we start new trade wars with Europe, most investors will be looking to reduce their stock exposure," Meckler said. "With that period nearby, investors are reluctant to commit to new purchases."

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.13%, while the pan-regional STOXX 600 index .STOXX in Europe lost 0.08%.

On Wall Street, the Dow Jones Industrial Average .DJI fell 45.75 points, or 0.17%, to 27,604.03. The S&P 500 .SPX lost 2.72 points, or 0.09%, to 3,110.04 and the Nasdaq Composite .IXIC dropped 7.44 points, or 0.09%, to 8,559.23.

U.S. economic reports countered data earlier this week that showed manufacturing activity contracted for a fourth straight month in November, a slowdown in growth in the services sector and a drop in construction spending in October.

The dollar fell for a fifth straight session as some traders worried about the week's economic data. A stronger euro and strengthening British pound also hurt the greenback.

Sterling has gained more than 1.5% this week against the dollar as the ruling Conservative Party will likely win a majority in next week's election and end 3-1/2 years of Brexit-related uncertainty by taking Britain out of the European Union.

The dollar index .DXY fell 0.25%, with the euro EUR= up 0.23% to $1.1101. The Japanese yen strengthened 0.19% versus the greenback at 108.68 per dollar.

Sterling GBP= was last trading at $1.316, up 0.44% on the day.

Investors remained focused on how much damage the trade war is causing around the world and whether the signs of economic stabilization seen in the euro zone will continue.

German industrial orders fell unexpectedly and retail sales in the euro zone fell at their sharpest rate this year in October. Overall, the euro zone economy grew at a modest pace in the third quarter.

Germany's blue-chip index .GDAXI , home to major industrial exporters, fell 0.48%.

German 10-year bond yields rose slightly more than 2 basis points to -0.2930 percent DE10YT=RR . Other core government bond yields also moved between 1 and 2 bps BE10YT=RR .

The benchmark 10-year U.S. Treasury note US10YT=RR fell 5/32 in price to yield 1.7965%.

Oil prices rose on expectations the Organization of the Petroleum Exporting Countries and allied oil producers will deepen production cuts in an effort to prop up prices and prevent a glut next year.

Brent crude LCOc1 futures rose 39 cents to $63.39 a barrel. U.S. crude CLcv1 rose 0.27% to $58.59 a barrel.

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