23 Sep 2018 21:30 (GMT)
U.S. stocks were mixed, with the Dow industrials higher on the perception of easing trade concerns. U.S. government bonds rose. The dollar was stronger. Crude oil prices were higher as investors anticipate tigher supplies. And gold prices were lower, falling below $1,200.
Though less than the feared 25%, the initial 10% import tariffs on U.S. LNG to China will still have a big impact, says RBC commodities strategist Christopher Louney. "More worrying is that these tariffs could potentially impact the ability of the next round of U.S. LNG export projects to close contracts with Chinese purchasers." That he says, would impact the building of export facilities.
The Dow Jones Industrial Average edged higher to cap off its biggest week of gains since mid-July, as investors showed signs of cautious optimism that the worst of the continuing trade spat may have passed.
Investors continued to tamp down their fears of an all-out trade war between the world’s two biggest economies and bought stocks that had been whipsawed by the threats and tariffs the U.S. and China have leveled at one another.
Shares of aerospace manufacturer Boeing and 3M, a maker of industrial adhesives and Post-it Notes, were among the best-performing shares in the index of 30 stocks. The Dow has risen in eight of the past nine trading sessions, with the most recent gains putting the blue-chip index up 2.2% for the week, its best weekly stretch since July 13.
But investors warned the Dow industrials remain vulnerable to the continuing trade battle, especially since the index’s components get a bigger portion of their revenue from overseas and China compared with the S&P 500. The slate of tariffs on $200 billion of Chinese goods President Trump recently announced are set to kick in Monday, first at 10% and then rising to 25% at the end of the year.
The Dow Jones Industrial Average rose 86 points, or 0.3%, to 26743, while the S&P 500 was little changed. The Nasdaq Composite slipped 0.5% as technology stocks weakened later in the session.
While the Dow and the S&P remain on pace to notch weekly gains, the Nasdaq ended the week down 0.3%.
Earlier in the day, Asian stocks extended their gains, capping a week where investors looked past international trade tensions and bet that a strengthening U.S. economy could keep the rally intact.
Taking their lead from Wall Street’s record close on Thursday, stock markets in Asia were poised for strong weekly gains. Asian markets rallied across the board.
Chinese equities led the way, with the Shanghai Composite closing up 2.5%, its biggest gain in six weeks.
Japan’s Nikkei Stock Average rose 0.8% while Hong Kong’s Hang Seng finished up 1.7%.
Asian markets rose, extending midweek gains despite fresh U.S. and China trade tariffs, ahead of holidays across the region the next couple of weeks.
Chinese large caps popped 3%, in the process logging their best week in three years. The Philippine benchmark closed with a 3.5% rise, slashing this week’s drop to 0.4%. Taiwan’s main index rose 1.3%. The lone decliner was India, where the Sensex rose an early 1% after Thursday’s holiday but is now down slightly.
The U.S. dollar strengthened in trading but still looked set for its worst weekly performance in a month, while the British pound was pushed sharply lower after Prime Minister Theresa May spoke about the possibility of a "no deal" Brexit.
The ICE U.S. Dollar Index was 0.4% stronger at 94.257 but headed for a 0.7% weekly decline, its worst in a month. Shorter-dated U.S. Treasury yields were on the rise, with the 2-year yield rising to 2.821% and the 10-year yield holding above 3%, which lent some support to the greenback.
On the Brexit front, European Union leaders rejected the U.K.’s post-Brexit proposal, adding pressure for the prime minister, whose Conservative Party is holding its annual conference next week.
The British pound was thus unable to hold on to its gains from earlier in the week when hopes for a Brexit resolution had been high, and sharply dropped to its lowest since last week. Sterling last fetched $1.3076, down from $1.3268.
U.S. government bond prices rose but still capped off a fourth week of declines as investors turned to riskier assets like stocks ahead of next week’s Federal Reserve meeting.
The yield on the 10-year Treasury rose to 3.068% from 3.076% Thursday and 2.992% last week. Yields rise as bond prices fall.
Yields rose in the beginning of the week, reaching the highest levels in months as investors assessed a growing supply of corporate and government bonds and a solid U.S. economic outlook.
Treasury yields then pared some of their gains on Thursday as the prospect of higher returns ignited new demand, according to some analysts. Investors bought both U.S. stocks and government bonds, with major stock indexes hovering near highs, the latest sign of continuing investor optimism about the U.S. economy.
Geopolitical concerns helped curtailed some of the selling in Treasurys this week. British Prime Minister Theresa May warned that Brexit talks had hit a logjam, calling on European leaders to propound new proposals.
Oil prices climbed back toward two-month highs as investors wagered that this weekend’s meeting of major oil producers in Algeria won’t do much to reverse a trend toward tighter global supplies.
Light, sweet crude for November delivery settled 0.7% higher at $70.78 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, rose 0.1% to $78.80 a barrel.
The U.S. benchmark oil price has risen four of the past five weeks, is 8% higher from one month ago.
A monitoring committee meeting on Sunday between the Organization of the Petroleum Exporting Countries and nonmembers, including Russia, is expected to feature discussions around offsetting lower Iranian exports with production elsewhere. Added production could have the effect of lowering oil prices, though much would depend on the size of any output increase.
Oil prices were higher across-the-board early in the morning but fell briefly mid-morning after a report from Reuters, citing unnamed sources, indicated OPEC and nonmembers would be discussing raising output by 500,000 barrels a day. But analysts said skepticism remains that any major output boost will be agreed upon at the meeting, and oil prices soon rebounded.
Meanwhile, gold prices dropped back through the $1,200-an-ounce mark after signs of continued strength in the U.S. economy shot the dollar sharply higher.
Gold for September delivery fell 0.83% to $1,196.20 a troy ounce on Comex, slumping in tandem with a rise in the value of the U.S. dollar.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, climbed 0.35%. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies.
Friday’s fall wiped off most of the gains made over the week, although gold still managed to finish the in the green for the second consecutive week.
The fall came as Goldman Sachs formally cut its bullish price forecasts for the metal.
Goldman Sachs now forecast gold at $1,250, $1,300 and $1,325 a troy ounce over the next three, six and 12 months, down from its previous expectations of $1,350, $1,375 and $1,450 a troy ounce, respectively.