Stocks Drop as China Dents Hope for Long-Term Deal

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U.S. equity-index futures and European stocks fell on Thursday following reports that China doubts the possibility of a long-term trade deal with President Donald Trump. Haven assets including bonds, gold and the yen all advanced.

Contracts for all three main American gauges turned lower along with the Stoxx Europe 600 Index after Bloomberg reported Chinese officials have warned they won’t budge on the thorniest trade issues and remain concerned about Trump’s impulsive nature. Earlier, stocks had been edging higher following the Federal Reserve’s third rate cut of the year and some solid corporate results.

As investors switched to a risk-off mood, European bonds extended gains and Treasuries added to their Wednesday rally. The euro stayed higher after data showed the region’s economy performed better than economists forecast in the third quarter.

China’s uncertainty over sealing a long-term trade deal with the U.S. is testing investor confidence just hours after the Fed largely assuaged markets with its rate cut and signals that any policy tightening is a long way off. Even the prospect of a mini-deal between the two largest economies was dealt a blow, after Chile canceled a meeting where the nations intended to sign a partial pact. Xinhua reported that negotiators from both sides will have a phone call on Friday.

The fresh trade worries overshadowed a slew of corporate results and company news:

Fiat Chrysler jumped 10% while Peugeot owner PSA fell by about the same amount after the two sides announced a 50-50 merger.Royal Dutch Shell Plc warned of uncertainty on the pace of its buyback program, even as it reported solid earnings.BNP Paribas SA reported a 35% gain in fixed income trading.Drugmaker Sanofi’s profit came in above estimates.Facebook Inc. and Apple Inc. both posted upbeat results after the Wednesday close.

Earlier in Asia, stocks slipped in Shanghai and rose in Hong Kong before data showed its economy fell into a recession in the third quarter. Shares edged higher in Tokyo, where the Bank of Japan dropped its time frame for forward rate guidance.

Here are some key events coming up this week:

Earnings include: Exxon Mobil and Macquarie Group on Friday.The Fed’s preferred inflation metric, the core PCE deflator, is due Thursday.Friday brings the monthly U.S. non-farm payrolls report.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index dipped 0.3% as of 7:11 a.m. New York time.The Stoxx Europe 600 Index sank 0.4%.The Shanghai Composite Index declined 0.3%.The MSCI Emerging Market Index climbed 0.3%.

Currencies

The Bloomberg Dollar Spot Index decreased 0.2%.The euro climbed 0.1% to $1.1159.The British pound increased 0.3% to $1.2946.The onshore yuan climbed 0.2% to 7.043 per dollar.The Japanese yen jumped 0.6% to 108.25 per dollar.

Bonds

The yield on 10-year Treasuries declined three basis points to 1.74%.The yield on two-year Treasuries decreased one basis point to 1.59%.Germany’s 10-year yield decreased five basis points to -0.41%.Britain’s 10-year yield fell five basis points to 0.632%.Japan’s 10-year yield decreased two basis points to -0.133%.

Commodities

West Texas Intermediate crude decreased 0.2% to $54.95 a barrel.Iron ore declined 0.7% to $80.30 per metric ton.Gold rose 0.7% to $1,506.05 an ounce.

Bloomberg