Investors are expecting a relief from trade tension as trade talks between the US and China are talk to begin. On Wednesday, stocks stumbled and bonds rise as US President Donald Trump’s political position was terrorized by the criminal convictions of two former advisers, while the US dollar headed for its 6th straight day of losses. Investors had a lot to digest with the conviction of Trump’s former campaign chairman on eight counts of financial wrongdoing and a guilty plea by his former personal lawyer in separate cases.
US stock futures fell and were trading 0.2% to 0.3% lower at 1240 GMT.
US bond yields dropped as investors sought safety in Treasuries. They were trading at 2.8207 % on compared with Tuesday’s close of 2.844%.
Commerz bank rates strategist Christoph Rieger said,“Trump has weathered quite a few allegations before this, where many people were quick with the ‘I’ word (impeachment), so we need to see whether this could open a new chapter or if it will calm down again and markets move on.”
Due to uncertainty, MSCI’s all-country world stock index was unmoved. The world stock was rising 0.3% after the S&P 500 hit a record intra-day high of 2,873.23 points, topping the 2,872.87 set on 26 January.
The index was moved towards the longest-running bull market in its history. Its continually rise highlights the divergence in fortunes between U.S. stocks – turbo-charged by tax cuts and share buybacks – and the rest of the world. Year-on-year earnings growth in the US is expected to be around 24% this year while Europe is expected to deliver around 9 %.
European shares edged down 0.1%, market trades lower as awaited US-China trade talks set to resume under the cloud of Trump’s prediction that they would make no real progress.
Donough Kilmurray managing director and head of the Investment Strategy Group for EMEA at Goldman Sachs said,“The key point is these are mid-level officials”, “It’s good they are talking, but at that level of engagement we doubt anything significant will come out of it.”
The US dollar gave up early profits, set for its sixth straight day of selling after Trump’s criticism of the Federal Reserve’s rate rises in a Reuters interview. The dollar index fell 0.3% to 94.98, while the euro hit a two-week high against the greenback, at $1.1605.
Emerging-market stocks jump 0.4%, leaving 13-month lows further behind as the dollar’s losses helped ease pressure on the index which entered bear territory last week, nearly $1 trillion market cap down from its January peak. “If you look at the transmission from economic growth to earnings growth to shareholder returns, it’s strongest in the US, it’s ok in Europe and pretty weak in EM,” Goldman’s Kilmurray added, who has been underweight emerging markets for 5 years.
“The question we’re getting asked now by investors is whether what we see in EM is a sign that something bigger is going wrong in the global economy. Our answer to that is no, these issues have been local issues,” he also said.
A new threat of further sanctions on Russia from US lawmakers hit the rouble and backed the market’s view that Russian sanctions would increase in rapidity regardless of the Trump administration.
Shares of Chinese sold overnight, sending the Shanghai Composite index down 0.7 % after the country’s central bank said it would not resort to strong boost to support growth.
German 10-year Bunds bucked the trend set by Treasuries. Yields on the euro zone benchmark bond hit their highest since 10 August, tightening the gap with the US as the eurozone economy showed signs of improvement.
Wednesday’s release of minutes was looked by the investors from the U.S. Federal Reserve’s August meeting and a speech on Friday by Fed Chairman Jerome Powell for clues on future rate hikes.
Jim Reid, strategist at Deutsche Bank said,“This could present the opportunity for the Fed to discuss longer-term issues, potentially including discussion around the balance sheet and the implementation of monetary policy”.
In commodity markets, U.S. crude rose 1.8 % to $67.04 a barrel and Brent crude climbed 1.8% to $73.94 per barrel on an industry report showing a declined in U.S. crude inventories. Copper prices declined ahead of the trade talks. Spot gold, however, rose 0.3% to $1,199.5 an ounce.