Trade war uncertainty drags on global stock markets

NEW YORK (Reuters) - Stock markets around the world declined on Thursday and emerging market stocks fell for the sixth day as investors shied away from risk and braced for an escalation in a trade conflict between the United States and China.

The dollar edged lower ahead of Friday’s highly anticipated U.S. jobs report for August and also came under pressure as investors worried about trade tensions sought safety in Japan’s yen and the Swiss franc.

One big worry for investors was the end of a public consultation period over trade on Thursday night, after which U.S. President Donald Trump could impose tariffs on an additional $200 billion of Chinese goods.

China’s commerce ministry warned that the country would retaliate against any new tariff measures. Trump had said on Wednesday that the United States was not yet ready to come to an agreement with China.

“Investors have been jittery on concerns about a trade war. Trade talks have been the absolute biggest driver in stocks with the Fed in the background. Otherwise things look pretty good. Economic data is good,” said Burns McKinney, portfolio manager at Allianz Global Investors in Dallas.

Investors also awaited news from U.S.-Canada talks about revamping the North American Free Trade Agreement (NAFTA). By Thursday afternoon a few stubborn issues stood in the way of a deal, including dairy, protection for media companies, and how to solve future trade disputes.

The Dow Jones Industrial Average rose 20.88 points, or 0.08 percent, to 25,995.87, the S&P 500 lost 10.55 points, or 0.37 percent, to 2,878.05 and the Nasdaq Composite dropped 72.45 points, or 0.91 percent, to 7,922.73. [.N]

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The pan-European FTSEurofirst 300 index lost 0.49 percent and MSCI’s gauge of stocks across the globe shed 0.35 percent.[.EU]

U.S. Treasury yields fell on safety buying as stocks dropped and as bonds offered investors higher yields after recent weakness driven by heavy corporate issuance.

“A portion of (the Treasury rally) is supported by the general ‘risk off’ move across all risk assets,” said Mike Lorizio, head of Treasuries trading at Manulife Asset Management in Boston.

MSCI’s emerging market stock index lost 0.19 percent bringing it near a 13-month low hit last month.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.7 percent.

The dollar index, tracking it against a basket of major currencies, fell 0.21 percent, with the euro down 0.03 percent to $1.1625.

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Late in the day the greenback added slightly to losses against the yen after CNBC reported that Trump told a Wall Street Journal columnist he will take his trade fight to Japan. [FRX]

Sterling added to Wednesday’s gains as some investors positioned for a favorable Brexit outcome, though it was well below the previous session’s high as progress was uncertain. It was last up 0.2 percent against the dollar. [GBP/]

MSCI’s index of emerging market currencies, which had earlier paused near 16-month lows, was down 0.02 percent after two straight days of heavy declines.

Emerging markets have been hit by financial crises in Argentina and Turkey. In Indonesia, the central bank has intervened in recent weeks to stem the rupiah’s slide.

Crude oil futures fell after U.S. data showed gasoline inventories rose unexpectedly last week, overshadowing a bullish drawdown in crude stocks. [L3N1VS3IY]

U.S. crude fell 1.16 percent to $67.92 per barrel and Brent was last at $76.68, down 0.76 percent.[O/R]

U.S. gold futures gained 0.37 percent to $1,205.80 an ounce.

(Graphic: World FX rates in 2018:

Additional reporting by Saqib Iqbal Ahmed, Jessica Resnick-Ault and Karen Brettell in New York and Ritvik Carvalho, Julien Ponthus, Sujata Rao and Kit Rees in London; Editing by Bernadette Baum, James Dalgleish and David Gregorio