Global stocks fall on U.S.-China trade spat, oil rises

NEW YORK (Reuters) - Global stocks ended lower on Monday as investors eyed an escalating trade dispute between the United States and China while oil prices rose on bets that an OPEC production increase would be smaller than expected.

A jump in energy shares helped limit losses in Wall Street’s major indexes, which closed well above session lows.

U.S. President Donald Trump on Friday announced tariffs on $50 billion of Chinese imports, effective July 6.

China said it would retaliate immediately by suspending previous trade agreements with Trump’s administration and slapping duties on American exports, including crude oil.

“The biggest thing hanging over markets is trade and the back and forth between the U.S. and China,” said Chris Zaccarelli, Chief Investment Officer, Independent Advisor Alliance in Charlotte, North Carolina.

“But, if people thought this was really going to be a trade war stocks would be down a lot more. The fact they’re down so little means that people think what the Trump administration is doing is part of their negotiating strategy.”

The Dow Jones Industrial Average .DJI fell 103.01 points, or 0.41 percent, to 24,987.47, the S&P 500 .SPX lost 5.8 points, or 0.21 percent, to 2,773.87 and the Nasdaq Composite .IXIC added 0.65 point, or 0.01 percent, to 7,747.03.

The energy sector .SPNY was the S&P 500's second most positive boost with a 1.1 percent increase as crude oil futures reversed earlier losses to settle higher.

U.S. crude CLcv1 rose 1.11 percent to $65.78 per barrel after hitting a two-month low of $63.59 and Brent LCOcv1 was last at $75.26, up 2.48 percent on the day after falling to a six-week low of $72.45. [O/R]

A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., June 4, 2018. REUTERS/Lucas Jackson

The Organization of the Petroleum Exporting Countries is due to meet in Vienna on June 22 to decide production policy. OPEC and some allies including Russia have been restricting output since the start of 2017.

Bob Yawger, director of energy futures at Mizuho in New York, said indications from OPEC members and other large producers on the scale of potential production increases would drive the oil market this week.

“Clearly investors have already priced in some easing on the production limits that OPEC has had in place now for some time,” said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.

The pan-European FTSEurofirst 300 index .FTEU3 lost 0.80 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.43 percent.

U.S. long-dated Treasury yields were volatile after a hectic week when the Federal Reserve struck an upbeat tone on the U.S. economy. [L1N1TK1E3]

Benchmark 10-year notes US10YT=RR last rose 1/32 in price to yield 2.9205 percent, from 2.924 percent late on Friday.

The 30-year bond US30YT=RR last fell 2/32 in price to yield 3.0497 percent, from 3.047 percent late on Friday.

Anxiety about global trade spurred demand for currency safe havens, such as the Japanese yen and Swiss franc.

The yen strengthened 0.09 percent versus the greenback at 110.59 per dollar JPY=. The Swiss franc notched a 0.3 percent increase against the greenback at 0.9943 franc CHF= and a 0.2 percent gain versus the euro at 1.1550 franc EURCHF=.

The dollar index .DXY rose 0.01 percent, with the euro EUR= up 0.07 percent to $1.1615. However, China's yuan CNH=D3 fell 0.3 percent to 6.4560 per dollar.

Additional reporting by Richard Leong, Gertrude Chavez-Dreyfuss and Jessica Resnick-Aut in New York, Aparajita Saxena and Ankur Banerjee in Bengaluru, Tom Finn in London and Hideyuki Sano in Tokyo; Editing by Richard Balmforth and James Dalgleish