By Herbert Lash
NEWYORK (Reuters) – Oil prices and a gauge of global equity markets fell on Friday on media reports that the administration of President Donald Trump may limit U.S. portfolio investments into China, a move that would mark an escalation of U.S.-Sino trade tensions.
The delisting of Chinese companies from U.S. stock exchanges was part of a broad effort to limit U.S. investment in Chinese companies, two sources briefed on the matter told Reuters.
Shares on Wall Street pared gains to close down. The benchmark S&P 500 posted its biggest weekly loss since Aug. 23, and the Nasdaq posted its the biggest weekly loss since Aug. 2.
Chinese shares listed on U.S. exchanges tumbled, with Alibaba Group Holding <BABA.N> falling 5.15% and JD.com <JD.O> 5.95%. Baidu <BIDU.O> slipped 3.67%.
Renewed high-level trade talks between Washington and Beijing are scheduled for next month.
“If our policies spark a major sell-off in Shanghai where that creates problems for China, that could negatively impact the trade negotiations,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
Gold pared some losses, after falling more than 1%, as investors opted for the safety of bullion following the delisting reports.
MSCI’s world equity index <.MIWD00000PUS>, which tracks shares in 47 countries, had rebounded earlier in the session on optimism the U.S.-China trade row might be easing. Markets largely brushed off concerns about impeachment moves against Trump.
The world index closed down 0.41%, while on Wall Street the Dow Jones Industrial Average <.DJI> fell 73.28 points, or 0.27%, to 26,817.84. The S&P 500 <.SPX> lost 17.2 points, or 0.58%, to 2,960.42 and the Nasdaq Composite <.IXIC> dropped 90.06 points, or 1.12%, to 7,940.60.
Major equity indexes in Europe earlier closed higher, even as data showed slowing growth around the world.
U.S. data showed consumer spending barely rose in August and business investment remained weak, suggesting the American economy was losing momentum as trade tensions linger.
Still, the Commerce Department reports likely do not signal a recession is looming as consumer spending remains supported by solid income growth thanks to the lowest unemployment rate in nearly 50 years and massive savings.
A strong rally in mining shares propped up European shares, but they ended the week lower for the first time in five weeks as concerns about economic growth and trade, as well as political worries, kept a lid on gains.
The pan-European STOXX 600 index <.STOXX> closed up 0.47% and the FTSEurofirst 300 index <.FTEU3> of leading regional shares gained 0.41%.
Earlier in the day, Asia-Pacific shares outside Japan <.MIAPJ0000PUS> were buffeted by the political worries in the United States and shed 0.3%.
Oil prices fell and posted a weekly loss on faster-than-expected recovery in Saudi output, while investors also worried about global crude demand amid slowing Chinese economic growth.
During a volatile session, Brent crude <LCOc1> futures fell 83 cents to settle at $61.91 a barrel.
U.S. West Texas Intermediate (WTI) crude <CLc1> futures fell 50 cents to settle at $55.91 a barrel.
In China, the world’s second-largest economy and biggest importer of crude oil, industrial companies reported a contraction in profits in August.
“If the global economy weakens, for which there are already some signs, we may lower oil demand expectations,” IEA Executive Director Fatih Birol told Reuters.
Bond yields in France and Spain posted their biggest weekly decline in six weeks, while a key market gauge of the euro zone’s inflation expectations fell to its lowest level since early July at 1.188% <EUIL5YF5Y=R>, heading back towards record lows hit in June.
French and Spanish 10-year bond yields were down 6-9 basis points this week, their biggest weekly decline in six weeks <ES10YT=RR> <FR10YT=RR>.
U.S. Treasury prices traded little changed after U.S. data was weaker than expected and as month- and quarter-end rebalancing increased demand for safe-haven U.S. debt.
Benchmark 10-year notes <US10YT=RR> traded at break-even to yield 1.6853%.
The dollar index <.DXY> fell 0.05%, with the euro <EUR=> up 0.2% to $1.0943. The Japanese yen <JPY=> weakened 0.06% versus the greenback at 107.92 per dollar.
U.S. gold futures <GCcv1> settled down 0.6% to $1,506.40 an ounce.
(Reporting by Herbert Lash)