US-China trade spat escalates, with oil and copper prices slipping

New York — Oil and copper prices slipped on Thursday as the US-China trade dispute escalated while global equity markets traded slightly lower as gains in US tech shares offset declines in commodity and trade-sensitive shares.

The US and China implemented punitive 25% tariffs on $16bn worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.

The dollar rose after minutes released on Wednesday from the US Federal Reserve’s most recent meeting suggest it is on course for further interest rate hikes. The minutes showed policymakers discussed how global trade disputes could batter businesses and households. A prolonged trade war could change expectations for monetary tightening.

A drop in crude prices pushed oil heavyweights lower, with ExxonMobil leading declining shares in US markets and on MSCI’s gauge of global equity markets, which shed 0.29%. Oil prices were choppy as traders were tugged lower by the US-China trade dispute while receiving some support from a report showing a decline in US commercial crude inventories.

Brent fell 25c to $74.53 while US crude rebounded to slid 29c to $67.57 per barrel.

“Fears are rife that economic headwinds stemming from an escalation in their trade war will ultimately hurt global oil demand,” said Stephen Brennock, analyst at brokerage PVM Oil Associates.

In London metals markets, benchmark copper fell 0.35% at $5,984 a tonne, paring losses of more than 1% during the session. China accounts for nearly half of global copper consumption and prices are near their highest in two years as manufacturers have rushed to buy refined metal to avoid import tariffs.

In Europe, the pan-European FTSEurofirst 300 index lost 0.14% while shares on Wall Street trended lower. The Dow Jones Industrial Average fell 99.88 points, or 0.39%, to 25,633.72. The S&P 500 lost 6.26 points, or 0.22%, to 2,855.56; and the Nasdaq Composite dropped 14.05 points, or 0.18%, to 7,875.05.

The trade-sensitive S&P industrials sector dipped 0.44%, while the technology index rose 0.22 %, led by gains in Microsoft and Apple.

US treasuries were little changed ahead of a speech by Fed chair Jerome Powell on Friday at the annual economic symposium in Jackson Hole, Wyoming. “Everybody’s on wait-and-see mode for Jackson Hole tomorrow,” said Subadra Rajappa, head of US rates strategy at Société Générale in New York.

Benchmark 10-year US treasury notes rose 2/32 in price to yield 2.8189%. Signs of faster economic growth and inflation in the eurozone lifted German 10-year bund yields to 0.35%, up from recent lows of 0.29% earlier this week.

The dollar snapped a five-day losing streak. The dollar index rose 0.29% while the euro slid 0.19% to $1.1574. The yen weakened 0.51% against the greenback at ¥111.15.

The Australian dollar fell 1.17% after several senior ministers tendered their resignations on Thursday and demanded that besieged Prime Minister Malcolm Turnbull call a second leadership vote.

Reuters