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Emerging markets lead decline in global equities

Stock markets around the world fell yesterday and declines in emerging markets accelerated as a deadline in the US-China trade conflict loomed and US-Canada trade talks were due to resume.

Weakness in emerging market currencies helped support the dollar, even as sterling rebounded off a two-week low on hopes of a breakthrough in Brexit talks. That optimism came after a Bloomberg report said Britain and Germany were prepared to drop a key sticking point in the Brexit negotiations.

US Treasury prices gained slightly as emerging market stock weakness boosted demand for low risk US government debt, though pressure from a heavy corporate debt supply calendar limited gains.

A public comment period on the possibility of fresh US tariffs on another $200 billion of Chinese goods ends today, with expectations that the additional levies will be imposed by US President Donald Trump.

The United States and Canada will also resume discussions this week on revamping the North American Free Trade Agreement (NAFTA). Ottawa is not expected to back down on key issues despite Mr Trump’s threats to retaliate.

The Dow Jones Industrial Average fell 9.67 points, or 0.04 per cent, to 25,942.81, the S&P 500 lost 13.95 points, or 0.48 per cent, to 2,882.77 and the Nasdaq Composite dropped 109.57 points, or 1.35 per cent, to 7,981.68.

The pan-European FTSEurofirst 300 index lost 0.98 per cent and MSCI’s gauge of stocks across the globe shed 0.71 per cent.

In Asia, expectations of US tariffs sent the Shanghai SE Composite index down 1.7 per cent.

Emerging market stocks lost 1.73 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.8 per cent lower, while Japan’s Nikkei lost 0.51 per cent.

Emerging market currencies showed a second day of declines, with a JPMorgan emerging market currency index falling 0.3 per cent. Sterling was last trading at $1.2897, up 0.33 per cent on the day.

Measured against a basket of currencies, the dollar index fell 0.19 per cent, with the euro up 0.26 per cent to $1.1611.

Oil prices fell as a US Gulf tropical storm weakened and moved away from oil-producing areas, and concern about weakening global demand added downward pressure.

US crude fell 1.2 per cent to $69.03 per barrel and Brent was last at $77.43, down 0.95 pe rcent on the day.

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