Oil, copper slip as U.S.-China trade fight escalates

NEW YORK (Reuters) - Oil and copper prices edged lower on Thursday as the U.S.-China trade dispute escalated while global equity markets fell as gains in U.S. technology shares failed to offset declines in commodity-related and trade-sensitive stocks.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid

The United States and China implemented punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.

The dollar rose after minutes released on Wednesday from the Federal Reserve’s most recent meeting suggested the U.S. central bank is on course for further interest rate hikes.

The minutes showed policy-makers discussed how global trade disputes could batter businesses and households. A prolonged trade war could change expectations for monetary tightening.

U.S. trade tensions with China are more likely to deteriorate this year and will dampen global growth next year, Moody’s Investors Service said in an economic outlook report.

A drop in crude prices pushed oil heavyweights lower, with Exxon Mobil leading declining shares in U.S. markets and on MSCI’s gauge of global equity markets, which shed 0.42 percent.

Oil prices were choppy as the U.S.-Sino trade dispute weighed on the market, but crude drew some support from a report on Wednesday showing a decline in U.S. commercial crude inventories.

Brent settled down 5 cents at $74.73 while U.S. crude slid 3 cents to settle down at $67.83 per barrel.

“Fears are rife that economic headwinds stemming from an escalation in their trade war will ultimately hurt global oil demand,” said Stephen Brennock, analyst at brokerage PVM Oil Associates.

The dispute has yet to crimp economic growth. Data from the U.S. Labor Department showed the number of Americans filing for unemployment benefits fell last week. They are now so low economists have scrambled for explanations.

In London metals markets, benchmark copper fell 0.67 percent to $5,965.00 a ton, paring losses of more than 1 percent earlier in the session.

China accounts for nearly half of global copper consumption and prices are near their highest in two years as manufacturers have rushed to buy refined metal to avoid import tariffs.

In Europe, the pan-European FTSEurofirst 300 index closed down 0.19 percent, pulled lower by a 1.55 percent fall in trade-sensitive auto stocks. Sixteen companies in the 18-share index fell.

The Dow Jones Industrial Average fell 76.62 points, or 0.3 percent, to 25,656.98. The S&P 500 lost 4.84 points, or 0.17 percent, to 2,856.98 and the Nasdaq Composite dropped 10.64 points, or 0.13 percent, to 7,878.46.

The trade-sensitive S&P industrials sector dipped .037 percent, while the technology index rose 0.18 percent, the only S&P sector to rise as Microsoft, Nvidia and Apple led gains.

U.S. Treasuries were little changed ahead of a speech by Fed Chairman Jerome Powell on Friday at the Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming.

“Everybody’s on wait-and-see mode for Jackson Hole tomorrow,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Benchmark 10-year U.S. Treasury notes rose 1/32 in price to yield 2.8207 percent.

Signs of faster economic growth and inflation in the euro zone lifted German 10-year bund yields to 0.34 percent, up from recent lows of 0.29 percent earlier this week.

The dollar snapped a five-day losing streak.

The dollar index rose 0.51 percent while the euro fell 0.49 percent to $1.1539. The Japanese yen weakened 0.65 percent versus the greenback at 111.27 per dollar.

The Australian dollar fell 1.36 percent after several senior ministers tendered their resignations on Thursday and demanded that besieged Prime Minister Malcolm Turnbull call a second leadership vote.

U.S. gold futures for December delivery settled down $9.30 at $1,194 per ounce.

Graphic: Global assets in 2018:

Graphic: Emerging markets in 2018:

Graphic: World FX rates in 2018:

Graphic: MSCI All Country World Index Market Cap:

Graphic: The long U.S. bull run in context: here

Reporting by Herbert Lash; Editing by Nick Zieminski and Dan Grebler