Stock dip, US yields fall as markets brace for big week for trade, geopolitics
A U.S. tariff deadline on China, due to expire on Tuesday, is expected to be extended again, while U.S. President Donald Trump and Russian President Vladimir Putin are due to meet in Alaska on Friday to discuss ending the Ukraine war.
On Wall Street, the benchmark S&P 500 index and the Dow were trading slightly lower, while the Nasdaq was down. Energy and materials stocks were driving losses while healthcare and consumer discretionary shares were making gains.
The Dow Jones Industrial Average (.DJI), opens new tab fell 0.33%, the S&P 500 (.SPX), opens new tab fell 0.02% to 6,390.92 and the Nasdaq Composite (.IXIC), opens new tab rose 0.11%.
In Europe, the STOXX 600 (.STOXX), opens new tab index fell 0.07%. MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab was down 0.11% to 940.16, trading near its all-time record high reached in July.
"At the surface level the market is flat and calm and it looks like we are in wait-and-see mode to what the economic data will we are going to get tomorrow; all eyes on the CPI," Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey, said.
"When you look underneath the covers and at the breakdown within the market, you're getting a little bit more of a selloff."
The main economic release this week will be U.S. consumer prices on Tuesday, with analysts expecting the impact of tariffs to help nudge the core up 0.3% to an annual pace of 3% and away from the Federal Reserve target of 2%.
An upside surprise would challenge market wagers for a September rate cut, though analysts assume it would have to be a very high number given that a downward turn in payrolls is now dominating the outlook.
Markets imply around a 90% probability of a September easing, and at least one more cut by year-end.
The yield on benchmark U.S. 10-year notes fell 1 basis point to 4.273%, while the 30-year bond yield fell 1.7 basis points to 4.8373%.
Trump having repeatedly criticised the Fed for not cutting rates at recent meetings, and markets are eyeing who will succeed current chair Jerome Powell, whose term ends in May.
This, said Paul Mackel, Global Head of FX Research at HSBC, meant that the dollar's reaction to the CPI data would not be straightforward.
If the figure indicated higher U.S. tariff price pressures, "that could support the stagflation narrative, and to the dollar's detriment", he said, adding that this would also go against the view of some policymakers that tariffs were not causing prices to increase.
"If, however, softer U.S. CPI readings materialise, including the core goods figures, this would likely challenge the dollar too by supporting the case for further Fed easing, and perhaps see greater criticism from the U.S. administration towards Fed Chair Powell."
The dollar strengthened 0.2% to 148.01 against the Japanese yen and was up 0.59% to 0.813 against the Swiss franc . The euro was down 0.32% against the dollar at $1.1602. The dollar index rose 0.37% to 98.59.
The Australian dollar eased 0.26% to $0.6507 ahead of a meeting of the Reserve Bank of Australia, which is widely expected to back a rate cut. It stunned markets in July by skipping an easing of policy to await more inflation data.
Gold prices fell 1.53% to $3,346/58 an ounce after wild swings last week on reports that the U.S. would slap 39% tariffs on some gold bars, which are major exports of Switzerland.
The White House has said it planned to issue an executive order clarifying the country's stance.
Oil prices edged lower as investors looked ahead to the talks between Trump and Putin in Alaska on Friday, with U.S. policy towards Russian oil exports in focus.
Brent fell 0.26% to $66.42 a barrel, while U.S. crude dropped 0.17% to $63.77.
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