SHANGHAI, July 12 2019 : Asian shares pulled back today as worries over renewed Sino-U.S. trade tensions weighed on sentiment ahead of the release of June trade data from China, though expectations of a Federal Reserve rate cut later this month kept losses in check.
Those bets remained strong despite a rise in U.S. consumer inflation in June, and helped to lift the S&P 500 index to a record closing on Thursday. S&P 500 e-mini futures were last up 0.21% at 3,010.25.
Federal Reserve Chairman Jerome Powell indicated yesterday that a rate cut is likely at the Fed’s next meeting as businesses slow investment due to trade disputes and a global growth slowdown.
Today, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.05% in early deals, with Australian shares dipping 0.16% and Japan’s Nikkei stock index .N225 trimming 0.11%.
“Markets have enjoyed a bit of a calm spot in the U.S.-China trade war saga since the announcement of a truce and restarting of trade talks at the G20 meeting. Unfortunately, headlines are once again beginning to emerge,” ANZ analysts wrote in a morning note.
U.S. President Donald Trump said yesterday that China was not living up to promises it made on buying agricultural products from American farmers.
“While this wasn’t a big market mover, it does serve as a reminder that things could flare up again,” the analysts said.
Later today, China will release trade data for June, with analysts expecting exports to have fallen as weakening global demand and a sharp hike in U.S. tariffs took a heavier toll on the world’s largest trading nation.
Yesterday, the S&P 500 .SPX gained 0.23% to end at a record closing high of 2,999.91 points and the Dow Jones Industrial Average .DJI also hit a record high close of 27,088.08 points, rising 0.85% on the day.
U.S. Treasury yields were higher following weak demand for a $16 billion 30-year bond auction yesterday and after the U.S. Labor Department said its consumer price index excluding food and energy rose 0.3% in June, its biggest increase since January 2018.
The poorly received auctions had pushed the 30-year yield as high as 2.672% yesterday, according to Refinitiv data.
The yield on benchmark 10-year Treasury notes was last at 2.1361%, up from its U.S. close of 2.12% yesterday, while the 30-year yield touched 2.6512%, up from a close of 2.639%.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, was at 1.8605%, up from a close of 1.852%.
“The CPI report will have no material impact on Fed guidance nor have a significant influence on the great Fed debate around 25 or 50,” said Stephen Innes, managing partner at Vanguard Markets Pte, referring to expectations of the size of a July rate cut.
“After all, the FOMC is unquestionably willing to let inflation run hotter after spending the better part of a decade trying to ignite those flames,” he said.
The dollar index, which tracks the greenback against a basket of six major rivals, was flat at 97.044.
Global benchmark Brent crude gained 0.53% to $66.87 per barrel and U.S. West Texas Intermediate (WTI) crude was up 0.61% to $60.57 a barrel.
Gold prices, dulled by the stronger-than-expected U.S. consumer inflation data, regained some of their shine. Spot gold last traded up 0.28% at $1,407.56 per ounce. – Reuters