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U.S. Stocks Slump as China Trade Meeting Looms: Markets Wrap

Brendan Walsh and Vildana Hajric
U.S. Stocks Slump as China Trade Meeting Looms: Markets Wrap

(Bloomberg) -- U.S. equities declined as investors tried to gauge the outlook for a trade deal between China and the Trump administration. Treasuries slipped and the dollar gained.

The S&P 500 Index ended the day about half a percentage point lower after bouncing between small gains and small losses in light volume. Sentiment got a boost on speculation that China is ready to do a deal, while pessimists focused on a report that senior Chinese officials have indicated the range of topics they’re willing to discuss at upcoming talks has narrowed considerably. After the close of New York markets, the U.S. placed eight Chinese technology companies on a blacklist because of alleged human-rights violations, a move that may add to tensions between the countries.

In the wake of a slew of weak data and with protectionism portrayed as the main impediment to global growth, investor focus will return to foreign trade this week as Chinese Vice Premier Liu He and an entourage of officials head to Washington to resume talks with their U.S. counterparts. As economic indicators flash warnings, traders have ramped up bets for further Federal Reserve rate cuts. They’ll search for new clues on the policy path when minutes from the latest Fed meeting are released in coming days.

“Given the high level of uncertainty that’s out there and the cross-currents -- the cross-currents being escalating geopolitical risks on the one hand and increased monetary easing on the part of the world’s global central banks -- it’s really difficult at this point to determine which force is going to gain the upper hand,” said Ed Campbell, a portfolio manager and managing director at QMA.

The Stoxx Europe 600 index climbed as foodmaker and telecom companies advanced. The pound dipped as European leaders cast doubt on reaching a Brexit agreement in time for the U.K.’s Oct. 31 deadline. The dollar strengthened.

Japanese equities closed little changed, while Shanghai markets are yet to re-open after holidays. Hong Kong was also shuttered for a holiday, leaving traders with limited options to respond -- or not -- to escalating violence in the city, where protesters set fires and vandalized train stations and banks over the weekend. The yuan dropped in offshore trading by the most since late September.

Elsewhere, West Texas-grade oil steadied following its biggest weekly decline since July.

Here are some key events coming up this week:

Chinese Vice Premier Liu He visits Washington for trade talks with his U.S. counterparts.Fed Chair Jerome Powell speaks Tuesday on the final day of NABE’s annual conference in Denver; on the following day, minutes are released on the last policy meeting of the Fed’s rate-setting committee.Chinese President Xi Jinping and Indian Prime Minister Narendra Modi reportedly will meet at an unofficial summit.The U.S. releases a key measure of inflation on Thursday.

Here are the main moves in markets:

Stocks

The S&P 500 Index slipped 0.5% at the close of trade in New York.The Stoxx Europe 600 Index climbed 0.7%.Japan’s Topix index was little changed.

Currencies

The Bloomberg Dollar Spot Index rose 0.2%.The pound slipped 0.3% to $1.2296.The euro was little changed at $1.0975.The Japanese yen slipped 0.3% to 107.27 per dollar.The offshore yuan weakened 0.3% to 7.1312 per dollar.

Bonds

The yield on 10-year Treasuries rose three basis points to 1.56%.Germany’s 10-year yield rose one basis point to -0.58%.The U.K.’s 10-year yield rose one basis point to 0.45%.

Commodities

West Texas Intermediate crude rose 0.2% to $52.92 a barrel.Gold fell 0.8% to $1,492.09 an ounce.Copper gained 0.5% to $2.574 a pound.

--With assistance from David Wilson, Cormac Mullen and Todd White.

To contact the reporters on this story: Brendan Walsh in Austin at bwalsh8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh

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