Stocks

Gold hits 10-month peak on growth worries; dollar dips

Reuters NEW YORK | Updated on February 20, 2019 Published on February 20, 2019

Traders kept a close eye on the new round of talks between the US and China to resolve their trade spat. File Photo   -  Reuters

Global stock markets rose modestly along with gains on Wall Street, while Europe sagged under falling bank shares and concerns that a car tariff could hurt the region's exports to the US

Gold prices rose to a 10-month high on Tuesday as concerns over a global economic slowdown spurred a safe-haven bid and were also supported by a weaker US dollar, which fell on optimism for a breakthrough in US-China trade talks.

A gauge of global stock markets rose modestly along with gains on Wall Street, while Europe sagged under falling bank shares and concerns that a car tariff could hurt the region's exports to the US.

Traders kept a close eye on the new round of talks between the US and China to resolve their trade spat. Separately, the World Trade Organisation warned that a slump of its leading indicator of world trade in goods to its lowest reading in nine years could foreshadow a broader economic downturn, as it highlighted the need to reduce trade tensions.

“The rivalry between the US and China is deep-seated, and tensions will remain even if the current round of talks succeed,” Vincent Heaney, a strategist at UBS Global Wealth Management, said in a client note.

“With global growth and earnings also slowing, we favour only a modest overweight to global stocks.”

The Dow Jones Industrial Average rose 8.07 points, or 0.03 per cent, to 25,891.32, the S&P 500 gained 4.16 points, or 0.15 per cent, to 2,779.76 and the Nasdaq Composite added 14.36 points, or 0.19 per cent, to 7,486.77.

The pan-European STOXX 600 index lost 0.22 per cent and MSCI's gauge of stocks across the globe gained 0.20 per cent.

Emerging market stocks rose 0.13 per cent. MSCI's index of Latin American equities bucked the trend in stocks globally with a 1.2 per cent increase, mostly on the back of a 1 per cent gain in the Brazilian market.

Gold prices surged to a near 10-month high driven by concerns over slowing global growth, as dovish signals from Japan and Europe's central banks followed weak data from the US and China.

Spot gold added 1.1 per cent to $1,341.02 an ounce. US gold futures gained 1.66 per cent to $1,344.10 an ounce.

In currencies, the yen was little changed even after Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to ramp up stimulus if the stronger yen derails the path toward its 2 per cent inflation target.

The offshore Chinese yuan touched its strongest level against the dollar since February 1 following a Bloomberg TV report that the US is pressing to secure a pledge from China that it will not devalue its yuan as a part of a trade deal.

The dollar index fell 0.41 per cent, with the euro up 0.28 per cent to $1.134.

“We are hoping to hear more positive news on trade,” said Dean Popplewell, chief currency strategist at Oanda in Toronto. ”The dollar should come under pressure as it loses some safe-haven appeal.”

Sterling rose over 1 per cent versus the greenback on hopes that Prime Minister Theresa May will make progress in seeking changes to her Brexit deal with the European Union, although some traders struggled to explain the size of the move. The British currency was last trading at $1.3063, up 1.10 per cent on the day.

The Swedish crown pared losses against the dollar after hitting a more than two-year low of 9.417 after inflation data came in decidedly weak just two months after a milestone rate hike, dimming prospects of further tightening. The crown lost 0.46 per cent versus the US dollar at 9.303.

US crude rose 0.79 per cent to $56.42 per barrel and Brent was last at $66.47, down 0.05 per cent on the day.

Benchmark 10-year notes last rose 8/32 in price to yield 2.6393 per cent, from 2.666 per cent late on Friday. The 30-year bond last rose 11/32 in price to yield 2.9802 per cent, from 2.997 per cent late on Friday.

Published on February 20, 2019
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