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GLOBAL MARKETS-U.S. stocks lose steam as hopes waver for U.S.-China trade deal

Published 27/08/2019, 17:22
GLOBAL MARKETS-U.S. stocks lose steam as hopes waver for U.S.-China trade deal
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Wall St rises but gold, bond demand show safety appetite

* Japanese yen gains on dollar, Oil gains

(Updates prices after U.S. market open, adds commentary,

changes byline, previous dateline London)

By Sinéad Carew

NEW YORK, Aug 27 (Reuters) - Equity indexes on Wall Street

gave up earlier gains on Tuesday amid uncertainty over the

prospects for a U.S.-China trade deal, while demand for U.S.

treasuries and precious metals grew, showing an appetite for

less-risky investments.

Bond market investors showed a cautious picture as the

margin on interest rates on U.S. three-month Treasury bills over

the yields on benchmark 10-year Treasury notes grew to its

widest level since early 2007.

Gold rose as investors sought cover from worries over global

economic growth and trade, while silver latched on to bullion's

rally to breach the $18 an ounce mark for the first time in

nearly two years. The U.S. benchmark S&P 500 .SPX index fell as investors

lost some of the trade optimism that had helped boost overseas

markets.

Stock markets in Asia and Europe had advanced following U.S.

President Donald Trump's comment on Monday that Chinese

officials had contacted their U.S. trade counterparts and

offered to resume negotiations, an assertion China did not

confirm.

"We continue to have concerns about the global economy. The

U.S. President's deal with China is pending and that may be the

rhetoric from the White House as opposed to an actual fact

pointing to negotiation," said Bart Melek, head of commodity

strategies at TD Securities in Toronto.

The pan-European STOXX 600 index .STOXX rose 0.55% and

MSCI's gauge of stocks across the globe .MIWD00000PUS gained

0.20%.

The Dow Jones Industrial Average .DJI fell 84.06 points,

or 0.32%, to 25,814.77, the S&P 500 .SPX lost 7.05 points, or

0.24%, to 2,871.33 and the Nasdaq Composite .IXIC dropped

22.98 points, or 0.29%, to 7,830.75.

In currencies, investors were also sceptical of trade hopes

as the U.S. dollar lost ground to Japan's yen. The Japanese yen

strengthened 0.35% versus the greenback at 105.78 per dollar,

The dollar index .DXY fell 0.07%, with the euro EUR=

down 0.1% to $1.1089.

"Safer bets are outperforming as the dust settles on trade

war developments that left uncertain whether the U.S. and China

would strike a deal anytime soon. Persistent trade uncertainty

is credited with slowing the global economy and leaving it

vulnerable to tipping into recession," said Joseph Manimbo,

senior market analyst at Western Union Business Solutions.

Benchmark 10-year notes US10YT=RR last rose 20/32 in price

to yield 1.4761%, from 1.544% late on Monday.

The yield curve remained inverted with the spread on

interest rates on three-month bills over 10-year yields hitting

its widest level since March 2007. The yield curve often inverts

prior to a U.S. recession.

"The level of stress and volatility is persisting. The

market is not convinced it has found its footing," said Bruno

Braizinha, U.S. rates strategist at Bank of America (NYSE:BAC) Merrill

Lynch. L2N25N0NH

Spot gold XAU= added 1.1% to $1,542.10 an ounce. However,

gold prices were below their Monday high of $1,554.56, a level

which was last seen in April 2013. GOL/

Oil prices rose as investors in the commodity appeared to

latch on to Trump's Monday prediction of a trade deal with

China. U.S. crude CLcv1 rose 0.35% to $53.83 per barrel and Brent

LCOcv1 was last at $58.60, down 0.17% on the day.

The Shanghai Composite Index .SSEC had rallied 1.35%, with

a boost from data showing China's industrial companies returned

to profit in July.

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