U.S. shares falter, investors await U.S.-China trade deal

NEW YORK (Reuters) – U.S. stock indexes closed lower while the dollar edged higher on Monday, as investors appeared to need some convincing the United States and China would reach a trade agreement and weaker-than-expected construction data did not help their mood.

Oil futures settled higher after OPEC ally Russia said it would ramp up supply cuts and oil traders also cited U.S.-China deal hopes though equity declines dampened gains. [O/R]

U.S. President Donald Trump and Chinese President Xi Jinping might seal a trade deal around March 27, given progress in trade talks, the Wall Street Journal reported on Sunday.

Washington and Beijing have imposed tit-for-tat tariffs on billions of dollars worth of goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.

A source briefed on the negotiations told Reuters the countries appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods.

But while the reports had pushed up shares in Europe and Asia, Wall Street’s major indexes could not maintain a rally. While some investors were waiting for more concrete details of a trade deal, others said it made sense to take some profits after a strong start to the year.

“Now that a deal looks like it’s in the finishing stages you’re seeing people take profits,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

By Friday’s session close the S&P had rallied 11.8 percent year-to-date and was just 4.3 percent below its record closing high reached in late September.

U.S. Commerce Department data helped to sour the mood as it showed construction spending fell unexpectedly in December as investment in private and public projects dropped.

The Dow Jones Industrial Average fell 205.79 points, or 0.79 percent, to 25,820.53, the S&P 500 lost 10.78 points, or 0.38 percent, to 2,792.91 and the Nasdaq Composite dropped 17.79 points, or 0.23 percent, to 7,577.57.

The pan-European STOXX 600 index rose 0.23 percent and MSCI’s gauge of stocks across the globe shed 0.19 percent.

TRADE HOPES

Treasury yields fell on Monday as the market retraced a counterintuitive move higher on Friday in spite of soft U.S. manufacturing, personal income and spending data.

“The rally in (Treasury prices) occurred absent a new obvious fundamental driver, and likely partially reflected a slight retracement from Friday’s sell-off, which itself occurred despite weak economic data on the day,” said Jonathan Hill, U.S. rates strategist at BMO Capital Markets.

The dollar rose against a basket of major currencies on traders’ bets China and the United States would end their trade battle. The greenback gained for a fourth straight day, helped by the rise in U.S. bond yields with benchmark 10-year yields US10YT=RR hitting one-month peaks last week. [FRX/]

The dollar index rose 0.08 percent, with the euro down 0.29 percent to $1.1341.

Oil futures gained support on news Russia, the biggest non-member ally of the Organization of the Petroleum Exporting Countries, planned to speed up crude output cuts this month, Energy Minister Alexander Novak said.

Brent futures settled up 0.92 percent at $65.67 per barrel while U.S. crude settled up 1.42 percent at $56.59 per barrel.

In precious metals, gold dipped to its lowest level in more than five weeks as the dollar rose while platinum shed 2.2 percent as investors took profits from a recent rally.

Spot gold dropped 0.5 percent to $1,287.42 an ounce.