US stocks rise after Trump sticks to script on China

New York | US stocks erased losses and closed mostly higher after President Donald Trump stopped short of implementing draconian economic restrictions against China even as he blasted the country for its actions on the pandemic and in Hong Kong.

The S&P 500 ended May on an up note as it capped a second monthly advance.

Equities turned higher after Trump announced retaliation against China by withdrawing from the World Health Organisation. He said his administration will look into eliminating policies that give Hong Kong preferential treatment.

The President did not institute sanctions on Chinese officials as was anticipated.

"Nothing on changing trade deal or anything else with teeth. Looking into actions, might do something in the future, but markets won't worry about that now," said Dennis DeBusschere, a strategist at Evercore ISI. "He also stuck to script and hit many of the logical things people are upset with China about."

Stocks gained 4.5 per cent in May, buoyed by signs the economy is stirring after shutting down in April. But a flurry of negative headlines weighed on sentiment earlier in the day.

US consumer spending, which accounts for about two-thirds of the world's largest economy, plunged a record 13.6 per cent in April after the coronavirus pandemic halted purchases of all but the most essential goods and services.

Meanwhile, the President is escalating a confrontation with Twitter that threatens to damage social-media platform operators. Trump is also weighing in on political unrest in the Midwest, where protests against police violence have turned unruly. Chairman Jerome Powell said the Federal Reserve's main street lending program will start soon.

"I'm very cautious on my medium and even long-term outlook for the markets," Kate Jaquet, a portfolio manager at Seafarer Capital Partners LLC, said on Bloomberg TV. "I perceive there to be a very large disconnect between stock-market valuations across the globe and underlying company fundamentals."

The Stoxx 600 Index declined for the first time in five days, dragged lower by travel shares and auto makers. The euro edged higher after the region's inflation rate fell to the lowest in four years, adding to reasons for authorities to expand monetary stimulus.

Iron ore surged past $US100 a tonne as supply woes in Brazil coincide with sustained, robust demand in top steel producer China. Crude oil rallied late and posted its biggest monthly advance on record.

These are some of the main market moves:

Stocks

The S&P 500 Index gained 0.5 per cent to 3044.31 as of 4.03pm EDT, the highest in more than 12 weeks.

The Dow Jones industrial average dipped 0.1 per cent to 25,383.11.

The Nasdaq Composite Index gained 1.3 per cent to 9489.87, the highest in 14 weeks on the largest climb in more than a week.

The MSCI All-Country World Index climbed 0.1 per cent to 509.53, reaching the highest in 12 weeks on its fifth straight advance.

Currencies

The Bloomberg Dollar Spot Index dipped 0.2 per cent to 1228.25, the lowest in 11 weeks.

The euro gained 0.2 per cent to $US1.1102, the strongest in two months.

The Japanese yen depreciated 0.2 per cent to 107.82 per US dollar, the weakest in six weeks.

Bonds

The yield on two-year Treasury's sank one basis point to 0.16 per cent, the lowest in two weeks on the biggest tumble in more than a week.

The yield on 10-year Treasury's decreased four basis points to 0.65 per cent, the lowest in two weeks on the largest tumble in more than a week.

Britain's 10-year yield declined three basis points to 0.184 per cent, the biggest drop in more than a week.

Germany's 10-year yield decreased three basis points to -0.45 per cent, the largest tumble in more than three weeks.

Commodities

West Texas Intermediate crude increased 4.4 per cent to $US35.21 a barrel, the highest in more than 11 weeks on the biggest climb in more than a week.

Gold strengthened 0.8 per cent to $US1731.78 an ounce, the largest climb in more than two weeks.

Bloomberg

Washington Post