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Global Stocks Fall as China Holds Firm in Trade Talks

European and Asian stocks fell Thursday as China hardened its line going into trade talks set to start later in Washington.

Shares across Asia fell with Chinese A-shares down 1.5% in Shanghai, the Hang Seng in Hong Kong 2.25% lower and Korean stocks down 3%. The Stoxx Europe 600 was nearly 1% lower in early trade, while the FTSE 100 in London was down 0.6%.

U.S. stocks were priced to open lower on Thursday with futures on both the S&P 500 and Dow Jones Industrial Average down about 0.8%. The broad index was down 0.2% at the close on Wednesday, having been up as much as 0.5% earlier in the day.

The Wall Street Journal reported late Wednesday that Beijing has threatened unspecified retaliation if the White House pushes through tariff increases. It also said the Chinese leadership has apparently taken President Trump’s hectoring of the Federal Reserve chairman as a sign he thinks the U.S. economy is more fragile than he has publicly claimed.

“Equities have had one of the strongest starts to a year in 30 years, but most of the good news is now in the price,” said Graham Secker, European equity strategist at Morgan Stanley. “The latest twist in the U.S.-China trade negotiations adds another layer of uncertainty and it’s tricky to work out what’s true versus what’s rumor and speculation.”

Morgan Stanley thinks tariffs will be implemented by the end of the week but that they will prove to be temporary. However, Mr. Secker said it’s hard to be sure of any of this.

The Chinese currency fell to its weakest level since early January, hitting 6.84 yuan to the dollar in offshore futures markets. The dollar was also weaker against a broad basket of currencies with the WSJ Dollar Index down 0.04%.

In government bond markets, yields fell further as investors sought safety pushing up bond prices. The yield on 10-year U.S. Treasuries was 2.447% from 2.470% Wednesday, while the German bund yield fell to -0.059%, the most deeply negative it has been since late March.

In commodities markets, oil fell 1% to $69.69 a barrel, while in another sign of haven seeking, gold was up 0.2% at $1,284.10 an ounce.
Source: Dow Jones

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