Stocks ekedout meager gains on Friday before a meeting on trade between U.S. PresidentDonald Trump and Chinese President Xi Jinping, capping gains on the best firsthalf for global equities since 1997.
After stockmarkets slipped in Asia, European shares were higher, with the pan-EuropeanSTOXX 600 index up 0.27% by midday in London. Germany’s DAX index was thebiggest gainer, up 0.36% percent on the day. [.EU]
Trump andXi will meet during a Group of 20 summit this weekend in Osaka, Japan, fortalks that could help resolve a year-long trade war between China and theUnited States, as signs proliferate of rising risks to global growth.
MSCI’s AllCountry World Index, which tracks shares in 47 countries, was up just 0.06% onthe day, but heading for its best first half since 1997.
The indexwas set to break a three-week streak of gains but also on course for its bestmonth since January, gaining nearly 6% in June as equities rallied after majorcentral banks pivoted toward easier monetary policy.
That shiftcame as trade negotiations between the United States and China broke downearlier this year. Now markets are betting on an interest rate cut by the U.S.Federal Reserve as early as the next policy meeting in July.
OnThursday, China’s central bank pledged to support a slowing economy, before therelease of data that is expected to show China’s factory activity slowed for asecond consecutive month in June.
“Marketparticipants are taking a cautious approach ahead of this high-level meeting ashopes for a material breakthrough are low,” said Konstantinos Anthis, head ofresearch at ADSS.
“This is astellar opportunity for the two leaders to find some common ground and unlessthey do so, equities will likely push lower as a prolonged period of tariffs oneach other’s exports will take a heavier toll on both economies and globalgrowth.”
Futuresindicated a positive open on Wall Street. [.N]
Currencymarkets also reflected caution, with the Japanese yen reversing a three-daylosing streak against the dollar. [FRX/]
The U.S.currency was down 0.1% against a basket of other currencies and set to turn inits weakest monthly performance since the start of 2018. Bets on interest ratecuts from the Fed have pushed the dollar index down 1.7% this month.
In Asia,MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%. Japan’sNikkei stock index ended down 0.29%.
Chineseblue chips fell 0.24% on Friday and Hong Kong’s Hang Seng lost 0.32%.Australian shares shed 0.71%.
White Houseeconomic adviser Larry Kudlow said on Thursday that Trump had agreed to nopreconditions for the meeting with Xi and is maintaining his threat to imposenew tariffs on Chinese goods.
Kudlow alsodismissed a Wall Street Journal report that China was insisting on liftingsanctions on Chinese telecom equipment maker Huawei Technologies Co Ltd as partof a trade deal and that the Trump administration had tentatively agreed todelay new tariffs on Chinese goods.
“Peopledon’t know what to think before the upcoming meeting, so we’re likely to see alot of instability, uncertainty and a general lack of direction, which will beresolved only at the end of the weekend,” said Josh Mahoney, market analyst atIG in London.
“I’d err onthe side of caution. We aren’t going to see a major breakthrough on trade butmaybe we will see plans for further discussions down the line and that initself could give some sort of boost to markets to say it’s not necessarilyover quite yet.”
Elsewhere,euro zone government bond yields hovered near record lows in many cases beforethe release of inflation data for the bloc. Expectations are for inflation of1.2% in June — short of the European Central Bank’s target of just below 2% —so investors held on to government bonds in early trade. [GVD/EUR]
Incommodity markets, trade worries continued to weigh on oil. Benchmark Brentcrude was down 0.05% to $66.52 per barrel. [O/R]
The weakdollar and uncertainty over trade saw gold recover after dipping below $1,400per ounce on Thursday. Spot gold was last traded at $1,413.81 per ounce, up0.33%, but down from earlier highs.
(Publishedby,Reuters, June 2019)
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