Global Stocks Pause Ahead of Next Round of Trade Talks

Global stocks were little moved on Monday, after investor concerns about growth in the U.S. were calmed in recent days by positive economic data, accommodative policy signals from the central bank and hints of progress in trade negotiations with Beijing.

In Europe, the Stoxx Europe 600 edged down 0.1% in morning trading. Asian markets were mixed, with Japan’s Nikkei up 0.5% and Hong Kong’s Hang Seng Index gaining 0.2% after a half-day of trading ahead of Lunar New Year’s Eve. The Shanghai Stock Exchange was also closed.

Futures pointed to a flat opening for both the S&P 500 and the Dow Jones Industrial Average. Moves in futures don’t necessarily reflect market moves after the opening bell.

Investors will be watching closely as trade talks between the U.S. and China continue this week with just weeks to go until tariffs are supposed to rise once more.

Many investors now say that reaching a deal is in the interest of both parties–particularly Beijing, given concerns around an economic slowdown in China.

“The Trump administration has very much created a situation where the norm is now volatility, it’s OK for the numbers to be volatile, it’s OK for the Fed to do one thing and a minute later for the Trump administration to come out and criticize that,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham & Co., the private bank in London. “So there is less expectation for there to be smooth sailing.”

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.1%.

The 10-year U.S. Treasury yield ticked up to 2.704%, from 2.690% on Friday. Yields move inversely to prices.

Nonfarm payroll figures came in better than expected on Friday, buoying sentiment, as many analysts expected the partial shutdown of the U.S. government to weigh on economic data.

“The strong labor market attracts people from the sidelines,” Commerzbank analysts wrote in a recent note to clients. “From the Fed’s point of view, this is important because this implies that the slack in the labor market could be somewhat larger than expected.”

Last week, Jerome Powell, governor of the U.S. Federal Reserve eased investor concerns when he said, “the case for raising rates has weakened somewhat.”

“In America all they care about is the Fed, they care about interest rates,” Mr. Perdon said, adding that the size of the U.S. housing market means real estate, and thus interest rates, guide sentiment across the nation.

Meanwhile, investors have grown more wary about the economic outlook for other markets.

The latest data showed Chinese manufacturing contracting, with the Caixin/Markit Manufacturing Purchasing Managers’ Index falling to the lowest level in around three years. Berlin slashed its growth forecast for 2019 to 1% from 1.8% on geopolitical risks. And new figures show the Italian economy slipped into recession in the final quarter of last year.

This week, investors will be watching the closely as Brexit negotiations after Nissan scrapped plans to build a new model in the U.K. and reports that the royal family could be evacuated from London in the event of a no-deal Brexit, where the country comes crashing out of the EU next month without a deal in place.

Analysts at Rabobank pointed out that the royal family remained in London for the entirety World War II.

“Is a hard Brexit really on a larger scale of potential danger than that?” they wrote in a note to clients.

Elsewhere in commodities, global benchmark Brent crude oil was up 0.8% to $63.25 a barrel.

Source: Dow Jones