Tuesday, 18 May 2021

China industrial data offsets trade jitters; oil rises

NEW YORK (Reuters) – Stocks across the globe were little changed on Monday as upbeat industrial data out of China and hopes for more stimulus in the United States were offset by jitters over tensions between Washington and Beijing.

Technology stocks fell after a run of recent gains, while crude oil prices jumped.

Industrial output in China is returning to levels before the coronavirus pandemic halted huge swathes of the economy, driven by pent-up demand, government stimulus and surprisingly resilient exports.

On Wall Street, the Dow industrials .DJI touched a 5-month high but the Nasdaq .IXIC fell as much as 1.5% after hitting a record high last week.

Tension between the United States and China ahead of scheduled trade talks at the weekend to review an agreement signed in January was being blamed for the lack of clarity in the market’s direction.

Talks in Washington over a U.S. fiscal stimulus package caused further uncertainty for investors. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on Sunday said they were open to resuming negotiations on aid for stricken businesses and workers.

President Donald Trump has sought to take matters into his own hands, signing executive orders and memorandums aimed, among other things, at unemployment benefits, although they were smaller than the package that had been in place for weeks.

The Dow Jones Industrial Average .DJI rose 277.86 points, or 1.01%, to 27,711.34, the S&P 500 .SPX gained 6.31 points, or 0.19%, to 3,357.59 and the Nasdaq Composite .IXIC dropped 42.36 points, or 0.38%, to 10,968.62.

The pan-European STOXX 600 index rose 0.30% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.08%.

Emerging market stocks lost 0.35%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.07% lower, while Japan’s Nikkei .N225 lost 0.39%.

Oil rose, supported by the Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus. [O/R]

“The oil complex is heavily reliant on that aid. We need people to be able to boost economic activity to spur demand,” said John Kilduff, partner at Again Capital in New York.

U.S. crude CLc1 recently rose 2.3% to $42.17 per barrel and Brent LCOc1 was at $45.16, up 1.71% on the day.

The greenback ticked up against a basket of peers after posting its seventh consecutive weekly loss on Friday. Traders focused on fiscal stimulus in the United States and U.S.-China tensions ahead of trade talks on Aug. 15.

The dollar index =USD rose 0.103%, with the euro EUR= down 0.31% to $1.1749.

The Japanese yen strengthened 0.05% versus the greenback at 105.89 per dollar, while Sterling GBP= was last trading at $1.3083, up 0.25% on the day.

“The longer-term outlook continues to be great on the euro, so you’ll probably see people buying on dips,” said Ed Moya, senior market analyst at OANDA in New York.

Treasury yields ticked higher but remained close to recent lows.

“There is a growing recognition that the recovery has stalled,” said Jon Hill, an interest rate strategist at BMO Capital Markets in New York. “The question is, is that stall going to turn into more of a pause, or a more ominous retrenchment?”

Five-year yields last week fell to their lowest on record and benchmark 10-year yields dipped to their lowest since March as concerns about growth increased demand for the safe-haven debt.

Benchmark 10-year notes US10YT=RR last fell 2/32 in price to yield 0.569%, from 0.562% late on Friday.

The 30-year bond US30YT=RR last fell 13/32 in price to yield 1.2443%, from 1.229%.

Spot gold XAU= dropped 0.1% to $2,032.69 an ounce.

Trump also signed executive orders banning Chinese social media platforms WeChat – owned by Chinese tech giant Tencent (0700.HK) – and TikTok starting next month, and imposed sanctions on 11 Hong Kong and Chinese officials.

Graphic: 2020 asset performance here

Graphic: World FX rates in 2020 here

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