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While you were sleeping: Wall St declines, while Treasuries, gold gain

Friday 25th May 2018

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US Treasuries and gold rose, while Wall Street fell, as President Donald Trump cancelled a summit with North Korea’s Kim Jong Un, underpinning concern about geopolitical uncertainty as well as trade talks between the world’s largest economies. 

Treasuries climbed, pushing yields on the 10-year note two basis points lower to 2.98 percent.

Wall Street moved lower. In 2.11pm trading in New York, the Dow Jones Industrial Average slid 0.3 percent, while the Nasdaq Composite Index inched 0.03 percent lower. In 1.55pm trading, the Standard & Poor’s 500 Index fell 0.3 percent.

“Today you had a host of headlines, one having to do with trade and others having to do with North Korea,” Quincy Krosby, the chief market strategist at Prudential Financial, told Bloomberg. 

“You see money going into the Treasury market and money going into gold,” Krosby noted. “You would not have gold being a safe haven trade if it was just about trade. That’s typically related to geopolitical issues. The question for the market is, are there going to be more headlines like this?”

The US has begun an investigation to determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts "threaten to impair the national security," according to the Department of Commerce in a statement late on Wednesday.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Secretary of Commerce Wilbur Ross said in the statement. 

Concern about the Trump administration’s latest protectionist move weighed on sentiment.

“The bigger news has really been the proposed tariffs on foreign cars, the administration provides so much potential change everyday, that it’s difficult for investors to see consistency to the economic future,” Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey, told Reuters.

The Dow fell as declines in shares of Exxon Mobil and those of Chevron, recently down 2 percent and 1.5 percent respectively, outweighed gains in shares of General Electric and those of Nike, recently up 2.1 percent and 1 percent respectively. 

Shares of Exxon Mobil and Chevron moved lower with the price of oil amid concern OPEC will decide next month to lift production. 

“A move to put more oil on the market by Saudi Arabia and Russia would be very bearish for prices. The mere contemplation of it has hit oil prices this week,” John Kilduff, a partner at Again Capital in New York, told Reuters. 

In Europe, the Stoxx 600 Index slid 0.5 percent. The UK’s FTSE 100 Index retreated 0.9 percent, as did Germany’s DAX Index, while France’s CAC 40 Index dipped 0.3 percent.


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