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Stocks, Futures Drop on Rising U.S.-China Tension: Markets Wrap

Stocks, Futures Drop on Rising U.S.-China Tension: Markets Wrap

(Bloomberg) — Futures on the S&P 500 Index dropped with European stocks after China said the U.S. ordered the closure of its consulate in Houston, stoking tensions between the two countries. Treasuries edged higher and the dollar erased a loss.

The yuan weakened after a Chinese Foreign Ministry spokesman said the move was unilaterally initiated by the U.S. and China would “react with firm countermeasures” if Washington didn’t “revoke this erroneous decision.” Gold held above $1,850 an ounce, while silver climbed to the highest in almost seven years.

As earnings continue to roll in, investors are taking stock of a surge in global equities that left the MSCI gauge of developed and emerging-market shares at the highest since February. After the success of a European rescue package this week, focus turns to negotiations in the U.S. between Republicans and Democrats on more legislation to prop up the hobbled economy.

“I’m more concerned going into the August, September period: what’s going to then be the next catalyst to take the broader market higher,” Andrew Sheets, a cross-asset strategist at Morgan Stanley, said on Bloomberg TV. It’s going to be “a tougher period for stocks,” he said.

Elsewhere, oil in New York eased from a four-month high on signs of a surprise gain in U.S. crude stockpiles.

Here are some key events coming up:

Quarterly earnings gather steam, with reports due from Microsoft, Blackstone Group, Roche, Intel, Unilever, Canadian Pacific, Daimler, Hyundai and Mattel.The EIA crude oil inventory report is due Wednesday.U.S. weekly jobless claims come on Thursday.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index decreased 0.2% as of 8:55 a.m. London time.The Stoxx Europe 600 Index fell 0.8%.The MSCI Asia Pacific Index declined 0.7%.The MSCI Emerging Market Index dipped 0.5%.

Currencies

The Bloomberg Dollar Spot Index was little changed.The euro was little changed at $1.1528.The British pound fell 0.3% to $1.2688.The onshore yuan weakened 0.3% to 6.998 per dollar.The Japanese yen weakened 0.1% to 106.87 per dollar.

Bonds

The yield on 10-year Treasuries fell one basis point to 0.59%.The yield on two-year Treasuries decreased less than one basis point to 0.14%.Germany’s 10-year yield declined one basis point to -0.47%.Britain’s 10-year yield sank one basis point to 0.126%.Japan’s 10-year yield dipped one basis point to 0.018%.

Commodities

West Texas Intermediate crude declined 0.9% to $41.56 a barrel.Brent crude decreased 0.7% to $44.01 a barrel.Gold strengthened 0.7% to $1,855.28 an ounce.

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