Trade protectionism worry drags on stocks, dollar at six-week low

US and European stock markets were little changed yesterday amid investor concerns as world financial leaders at a G20 meeting dropped a pledge to keep global trade free and open, while the dollar hit a six-week low on worries over a dovish Federal Reserve.

Financial leaders of the world’s biggest economies made only a token reference to trade on Saturday, acquiescing to an increasingly protectionist US after a two-day G20 meeting failed to yield a compromise. Financial markets reacted cautiously after the meeting.

Lower crude prices weighed on energy shares on both sides of the Atlantic, with European stocks little changed on the day.

A two per cent fall in Deutsche Bank shares hurt European banking stocks.

Investors were awaiting a spate of Fed speakers this week, including Chair Janet Yellen on Thursday.

Anxiety over the G20 decision further stalled the benchmark US S&P 500 index’s gains after two straight sessions of declines last week. Still, the index was up more than 11 per cent since the election of US President Donald Trump in November, spurred by optimism over his plans to reform the tax code and cut regulation.

“Given the slow progress in implementing tax cuts, markets will soon realise that they are ahead of themselves,” said Hussein Sayed, chief market strategist at FXTM.

“I’m still quite confident that US protectionist policies will do more harm than good.”

The tech-heavy United States Nasdaq Composite index bucked the trend and ticked up to a record high of 5,915.120.

MSCI’s all-country world equity index was up 0.25 points, or 0.06 per cent, at 451.51.

The Dow Jones Industrial Average rose 24.85 points, or 0.12 per cent, to 20,939.47, the S&P 500 lost 1.61 points, or 0.07 per cent, to 2,376.64 and the Nasdaq Composite added 6.40 points, or 0.11 per cent, to 5,907.39.

Europe’s broad FTSEurofirst 300 index dropped 0.14 per cent at 1,489.74.

The dollar index, which measures the greenback against a basket of six major currencies, was last roughly flat at 100.290 after touching its lowest since Feb. 7 of 100.020. The index extended last week’s weakness following recent interest-rate guidance from the US Fed that was less hawkish than many had expected.

“It’s follow-through and a hangover from last week – the concept of a dovish Fed,” said Brad Bechtel, managing director at Jefferies in New York.

The dollar’s weakness made dollar-priced gold cheaper for non-US investors and helped spot gold prices hit a two-week peak of $1,235.50 an ounce.

Oil prices fell as investors continued to unwind bets on higher prices because of concerns that growing US oil output could hamper an Opec-led deal on production reductions.

Brent crude was last down 29 cents, or 0.56 per cent, at $51.47 a barrel. US crude was down 62 cents, or 1.27 per cent, at $48.16 per barrel.

The cautious mood boosted safe-haven Treasuries prices, helping push yields on safe-haven 10-year US Treasury notes to a two-week low of 2.484 per cent.


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