By Herbert Lash
NEWYORK (Reuters) – The dollar rebounded and global equity markets edged lower on Thursday as efforts by China to smooth the path forward in U.S.-Sino trade talks helped sooth investor sentiment, though fears remained that a phase one deal might not occur until next year.
Oil prices rose to a two-month high after Reuters reported the Organization of the Petroleum Exporting Countries and its allies are likely to extend existing output cuts until mid-2020.
Yields on government debt rose, snapping three sessions of declines, bolstered by China saying it was willing to work with the United States to resolve core trade concerns, which rekindled some hope for a bilateral deal.
A Wall Street Journal report that said China had invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing also lifted sentiment.
Germany’s trade-sensitive DAX index pared most losses to close 0.16% lower, while the Dow Industrials and S&P 500 index also pared early losses to briefly trade above break-even, before closing lower.
“This just shows that the trade deal is not dead and that we will get some sort of an extended truce, which is a positive,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“What we’re going through now is a market beginning to realize the daily rhetoric of the trade news – one day positive, one day negative – is beginning to wear off,” he said.
MSCI’s gauge of stocks across the globe shed 0.3%, while the pan-European STOXX 600 index lost 0.40%.
On Wall Street, the Dow Jones Industrial Average fell 54.8 points, or 0.2%, to 27,766.29. The S&P 500 lost 4.92 points, or 0.16%, to 3,103.54 and the Nasdaq Composite dropped 20.52 points, or 0.24%, to 8,506.21.
The latest news on the trade deal came after headlines earlier this week suggested ongoing talks were unravelling.
Reuters reported on Wednesday that negotiations to finalise a deal may extend into next year as Beijing presses for more extensive tariff rollbacks and the Trump administration counters with heightened demands of its own.
The yield of benchmark German and U.S. bonds ended a three-day streak of declines to edge higher.
German 10-year bond yields, considered a euro zone benchmark, rose more than 2 basis points to -0.325%.
The benchmark 10-year U.S. Treasury note fell 9/32 in price to push yields up to 1.7688%.
The dollar firmed late in the session.
“Right now the dollar is very trade headline dependent,” said Alfonso Esparza, senior currency analyst at OANDA in Toronto.
The dollar index rose 0.04%, with the euro down 0.12% to $1.1059. The Japanese yen strengthened 0.02% versus the greenback at 108.60 per dollar.
Brent crude settled up $1.57 at $63.97 a barrel, while West Texas Intermediate (WTI) crude gained $1.57 to settle at $58.58 a barrel.
Both benchmarks had fallen earlier in the session.
Gold prices eased. U.S. gold futures fell 0.7% to settle at $1,463.60 per ounce.
(Reporting by Herbert Lash, additional reporting by Shreyashi Sanyal in Bengaluru and Saqib Iqbal Ahmed in New York; Editing by and Dan Grebler and Alistair Bell)