Stocks gain even as trade tensions grow; oil rises

Bloomberg

Global equity markets reacted calmly to the latest salvos in the intensifying trade war between the US and China. Treasuries retreated and oil gained.
The S&P 500 Index rose on Tuesday, led by technology shares, even after Beijing responded to President Donald Trump’s announcement of fresh levies by saying it will impose tariffs on $60 billion of US goods starting this month.
The tit-for-tat exchange represents an escalation of the protectionist dispute, although it will be months before the levies hit levels some investors have been preparing for Asia equities recovered from early weakness after the US tariff announcement, with benchmarks in Japan and Shanghai jumping.
The Stoxx Europe 600 Index also recovered from a brief swoon following China’s response.
“It looks like the president has decided to increase pressure on China. The market was expecting a 25 percent rate but the fact that it’s 10 percent might mean it’s a little bit less of a threat than we thought,” Chris Zaccarelli, chief investment officer at Independent Advisor
Alliance, said. He added that the Chinese showed “restraint” by not copying the White House’s levies on $200 billion in goods. “They’re not matching the US dollar-for-dollar.”
Treasuries declined, pushing the yield on 10-year US bonds above 3 percent, as most European government bonds drifted lower. Italian debt dropped earlier after a report of yet more tension over the country’s impending budget, though it later reversed the move after Finance Minister Giovanni Tria spelled out his fiscal balancing act at a Bloomberg event.
Trump had vowed to increase pressure on China if the Asian nation retaliated against US tariffs, which raises the risk of more escalation between the world’s two biggest economies. However, the rhetoric has been running for months, and many assets have priced in rising tensions, helping to cushion the latest blows.
Elsewhere, the Australian dollar shrugged off trade concerns to reverse earlier losses as the central bank reaffirmed its next interest-rate move would likely be higher. Turkey’s lira fell for a third day. The US dollar was little changed. Oil jumped after Saudi Arabia expressed comfort with Brent oil prices rising above $80 a barrel. West Texas crude breached $70.
Japanese trade-flow numbers are due on Wednesday. The Bank of Japan holds its policy meeting on Wednesday. Britain releases inflation data on Wednesday. European PMIs are due on Thursday. The Organization of Petroleum Exporting Countries and its allies meet in Algiers this weekend.
The S&P 500 Index climbed 0.4 percent in New York. The Stoxx Europe 600 Index climbed 0.1 percent. The UK’s FTSE 100 Index fell less than 0.05 percent. The MSCI Emerging Market Index climbed
0.2 percent.
The Bloomberg Dollar Spot Index fell less than 0.05 percent. The euro climbed 0.1 percent to $1.17, the strongest in almost three weeks. The British pound gained less than 0.05 percent to $1.3162. The Japanese yen declined 0.5 percent to 112.37 per dollar, the weakest in two months. The yield on 10-year Treasuries jumped four basis points to 3.03 percent, the highest in almost four months.