NEW YORK (Reuters) - Wall Street’s indexes and bond yields ended down but well above their session lows while oil futures settled higher as investors bet that U.S. President Donald Trump’s threats to raise tariffs on China would not materialize.
Trump tweeted on Sunday that the United States would raise tariffs on $200 billion worth of Chinese goods this week, causing investors to seek safety and flee from risky assets. On Monday, Trump sharply criticized China.
But as Monday’s session wore on, the initial shock from the threats appeared to wear off. U.S. Treasury yields pared some of their declines.
Oil futures reversed course to settle slightly higher after a volatile day as rising tensions between the United States and Iran helped buoy prices. The futures had earlier touched a one-month low due to Trump’s tweets. [O/R]
In stocks, the S&P 500 closed down 0.4% after falling as much as 1.6% during the session.
“Investors are warming up to the idea that its more of a negotiation tactic than it is a petulant child screaming bloody murder,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
Fears about trade war escalation were also calmed somewhat by a statement from China’s foreign ministry on Monday that a Chinese delegation was still preparing to go to United States for trade talks.
“Right now the contingent from China is still coming. If that changes, then the market narrative and the market reaction might also change,” said Nolte.
The Dow Jones Industrial Average fell 66.47 points, or 0.25%, to 26,438.48, the S&P 500 lost 13.17 points, or 0.45%, to 2,932.47 and the Nasdaq Composite dropped 40.71 points, or 0.5%, to 8,123.29.
The pan-European STOXX 600 index lost 0.88% and MSCI’s gauge of stocks across the globe shed 0.65%. In comparison, the Shanghai SE Composite had closed up 5.6% in its biggest one-day percentage drop since February 2016.
The U.S. dollar slipped to a five-week low against the yen and fell versus other currencies on Monday after Trump said he would sharply raise tariffs on Chinese goods this week, risking the derailment of the trade talks between Washington and Beijing.
Volume, though, was thin overall with London and Tokyo markets closed for holidays.
The dollar weakened 0.30% versus the yen to 110.89 per dollar. The dollar index rose 0.01%, with the euro unchanged at $1.12.
Benchmark 10-year Treasury notes last rose 9/32 in price to yield 2.4998%, from 2.53% late on Friday.
U.S. West Texas Intermediate (WTI) crude futures settled up 31 cents, or 0.5%, at $62.25 a barrel. Brent crude futures settled up 39 cents, or 0.55%, at $71.24 a barrel.
(Graphic: World FX rates in 2019 - tmsnrt.rs/2egbfVh)
Additional reporting by Gertrude Chavez-Dreyfuss, Saqib Iqbal Ahmed, Richard Leong and Stephanie Kelly in New York, Amy Caren Daniel and Sruthi Shankar in Bengaluru, Saikat Chatterjee and Virginia Furness in London; Editing by Larry King and Dan Grebler