Investors more polarized on U.S. Treasuries amid trade worries

  • Investors more polarized on U.S. Treasuries amid trade worries

Investors more polarized on U.S. Treasuries amid trade worries

China said it would impose higher tariffs on a range of U.S. goods, striking back in its trade war with Washington shortly after U.S. President Donald Trump warned it not to retaliate in the long-running trade dispute between the world's two biggest economies. S&P 500 futures dropped 1.3 per cent. The dollar rose and Treasuries fell.

US stocks rebounded Tuesday as investors combed the remnants of the second worst rout of the year for bargains after both China and America appeared committed to continuing trade talks. "And you're also seeing President Trump confirmed a meeting with President Xi during next month's G-20 summit, which provides some optimism that despite the increase in tariffs, negotiations are still ongoing". However, Wes Goodman via Bloomberg made the point that China has reduced United States debt in 2016 and in 2018 amongst speculation that it was trying to support the Yuan.

Gold prices surged on Monday to a one-month high on what some analysts attributed to "safe-haven" buying in response to a steep plunge in USA equity markets.

There is also speculation on whether China will cut their holdings of U.S. Treasuries, after Monday tweet from Hu Xijin, editor-in-chief of the Global Times newspaper.

Elsewhere, European shares dropped more than 1% after the European Union said it was finalizing a list of US goods to target in the event Trump imposes levies on auto imports.

West Texas Intermediate fell 0.6 per cent to US$61.27 a barrel. Stocks in China were especially hard-hit last week as the USA increased levies on about US$200 billion worth of Chinese goods, though state funds buying equities to ease the turmoil helped push shares in Shanghai up more than 3 per cent. China has said additional duties imposed should be removed for an agreement, setting the stage for weeks of uncertainty in financial markets after investors had thought a pact was near.

Earnings this week include Vodafone, Alibaba, Tencent, Cisco, Nvidia.

And there's the question of where China would put its money - all that cash would have to go somewhere, and US bonds are among the highest-yielding in the world when weighed against their relatively low risk. Old school thinking says gold rallies during times of geopolitical turmoil, but new school thinking says that gold prices are controlled by interest rates.

Australian unemployment is out on Thursday. The Bloomberg Dollar Spot Index gained 0.1%.The euro bought $1.1203, little changed.

The MSCI Asia Pacific Index sank 0.7 per cent.

Japan's Topix index dropped 0.7 per cent as of 9.05am in Tokyo. The offshore yuan held at 6.9079 per dollar.

The MSCI Emerging Market Index decreased 1.7%. Currencies The yen was at 109.63 per dollar after falling 0.3%.

The British pound dipped 0.2 per cent to US$1.2927.

Gold increased 1% to $1,300.10 an ounce. At 2:52 p.m. (1852 GMT), the yield on the benchmark 10-year Treasury was 5.2 basis points lower at 2.4033% after touching 2.389%, the lowest since March 28.