By Nathan Allen
European stocks climbed Tuesday after a downbeat session in
Asia, as investors awaited a resolution to the U.S.-China trade
negotiations following the recent escalation in tensions.
In the U.S., futures pointed to opening gains of 0.7% for both
the S&P 500 and the Dow Jones Industrial Average, after the two
indexes on Monday each shed 2.4%, their steepest one-day losses
since Jan. 3.
The Stoxx Europe 600 was up 0.7% in midday trading. Germany's
DAX rose 0.6% and the U.K.'s FTSE 100 gained around 0.9%.
In Asia, Hong Kong's Hang Seng Index closed down 1.5%, Japan's
Nikkei fell 0.7% and Korea's Kospi gained 0.1%
Oil prices jumped in London afternoon trading after Saudi
Arabia's energy minister said crude flows at a major pipeline had
been temporarily halted following a drone attack that hit two
pumping stations. Global benchmark Brent crude rose 1.5% to $71.25
a barrel, while U.S.-counterpart West Texas Intermediate futures
were up 1% at $61.66 a barrel.
The drone strike came on the heels of an attack that damaged two
Saudi tankers near the Strait of Hormuz over the weekend, driving
prices to multiday highs Monday.
Shares of basic resources and oil-and-gas companies led the
gains in Europe. Industrial stocks were also trading higher even
after statistics showed eurozone industrial production fell for the
second straight month in March, casting doubt on the sustainability
of the economy's first-quarter pickup.
"As businesses in industry continue to indicate that new orders
are coming in weak and production expectations are sluggish, it is
likely that industrial production will come in modest at best for
the spring months," said Bert Colijn, senior economist at ING.
Germany's Bayer was among Europe's biggest losers, trading 2.7%
lower after a California jury awarded $2.06 billion to a couple who
blamed the company's Roundup weedkiller for causing their cancer.
Bayer's shares are down more than 45% over the past 12 months.
Volatility in global markets has surged in recent days, as the
dispute between the U.S. and China intensified after a period of
prolonged calm, prompting renewed concerns about global economic
growth.
On Monday, Beijing hit back against an increase in U.S. tariffs
with proposals to raise its own tariffs on around $60 billion of
U.S. imports. President Trump responded with plans to impose a 25%
levy on a further $300 billion of Chinese goods, including mobile
phones and laptops, as early as this summer.
Mr. Trump didn't rule out the prospect of an accord being
reached within the next few weeks, and said he was prepared to meet
Chinese President Xi Jinping at the coming G-20 summit, stoking
optimism for a successful outcome among some investors.
However, some analysts remained circumspect about the prospects
for a speedy resolution.
"Whilst Trump's comments offered some support to market
sentiment overnight, we suspect it will take more than that to
repair the damage done," said London Capital Group's head of
research Jasper Lawler in a note. "Investors will want to see
concrete evidence of progress after Trump's 180-degree turn last
week spooked the markets."
Kit Juckes, global strategist at Société Générale, said
Tuesday's gains should be viewed as a temporary effect rather than
a change in market direction.
"I wouldn't place too much faith that the current mood
improvement is going to last all that long. Still, it can certainly
last for a day or two," he said.
On Tuesday morning, Mr. Trump defended his strategy on Twitter,
blaming China for walking out on negotiations and arguing that
tariffs on Chinese imports have helped rebuild the U.S. steel
industry and fueled economic growth.
However, analysts have raised concerns over the potential
long-term effects that escalating duties will have on the broader
economy, warning the current spat could do lasting damage to
sentiment and undermine a projected economic uptick.
"If this trade war continues for a couple of months then the
recovery scenario in the second half is out," BNP Paribas Fortis
chief strategy officer Philippe Gijsels said.
Trade tensions have also hit the yuan, driving the currency
below 6.9 to the U.S. dollar in the offshore market, its weakest
level since late December.
The yield on 10-year U.S. Treasurys on Tuesday edged up to
2.417%, from 2.405% on Monday. Yields move inversely to prices.
German 10-year government bonds were still in negative territory at
-0.070%.
The WSJ Dollar Index, which tracks the dollar against a basket
of 16 currencies, was flat.
Elsewhere in commodities, gold was down 0.3% at $1,298.00 an
ounce.
(END) Dow Jones Newswires
May 14, 2019 08:50 ET (12:50 GMT)
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