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U.S. Stocks Mixed as Trump Warns China on Trade in UN Speech

September 25, 2018

U.S. stocks were mixed after President Donald Trump said China is taking advantage of the U.S. on trade while oil producers rallied on stronger crude prices. Treasuries fell as the Federal Reserve started its two-day policy meeting.

U.S. benchmarks briefly fell to their lows of the day as Trump told the United Nations that the U.S. trade deficit with China “is just not acceptable.” Crude temporarily erased gains after Trump said OPEC nations are “ripping off the world” on oil prices, which are near a four-year high. Benchmark Treasury yields touched 3.1 percent.

Core European bonds slipped with Treasuries, but Italian notes rallied as the country crept closer to a budget proposal. The dollar drifted lower. The Stoxx Europe 600 Index headed for its seventh gain in eight days, and Japanese equities rose to the highest since January. Some caution remained on display, with emerging markets underperforming.

Riskier assets are drifting in the face of mounting political, trade and policy headwinds and investors look toward what could be a long and bruising conflict between the U.S. and China following the Asian nation’s decision to call off planned talks after the latest round of tariffs. Adding to political concerns are reports that U.S. Deputy Attorney General Rod Rosenstein, who oversees a probe into Russian interference in the American election, may be poised to leave his post, while the nomination of Brett Kavanaugh to the U.S. Supreme Court continues to be mired in controversy.

Investors are also looking forward to the Federal Reserve. The central bank’s policy meeting this week will likely see interest rates increased for the third time in 2018 and feature fresh projections for the next few years.

“What will be more interesting will be to find out” the number of rate hikes anticipated for next year, Iain Stealey, portfolio manager at JPMorgan Global Strategic Bond Fund, who expects two Fed rate hikes this year and two in the first half of 2019, said on Bloomberg TV. “Inflation is above target, so they can keep going on this sort of slow normalization.”

Elsewhere, Brent climbed above $81 a barrel, reaching the highest since November 2014, while most metals fell. The pound added to gains made Monday when the currency was buoyed by increasing talk of a second U.K. referendum on the final Brexit deal.

Here are some key events coming up this week:

Japanese Prime Minister Shinzo Abe meets with President Donald Trump in New York to discuss trade. The Fed decision on Wednesday will be followed by a press conference with Chairman Jerome Powell. Thursday sees durable goods, GDP data and jobless claims for the U.S.These are the main moves in markets:

Stocks

The S&P 500 Index was little changed as of 11:13 a.m. in New York. The Stoxx Europe 600 Index gained 0.4 percent. The U.K.’s FTSE 100 Index increased 0.5 percent to the highest in more than three weeks. The MSCI Emerging Market Index declined 0.2 percent. The Nikkei 225 increased 0.3 percent.

Currencies

The Bloomberg Dollar Spot Index decreased 0.1 percent. The euro increased 0.3 percent to $1.1777. The British pound gained 0.4 percent to $1.3175. The Japanese yen was little changed at 112.85 per dollar.

Bonds

The yield on 10-year Treasuries rose one basis point 3.1 percent after hitting the highest since May. Germany’s 10-year yield rose three basis points to 0.54 percent. Britain’s 10-year yield climbed two basis points to 1.63 percent. Italy’s 10-year yield declined six basis points to 2.89 percent, the biggest fall in more than a week.

Commodities

West Texas Intermediate crude climbed 0.5 percent to $72.41 a barrel, near the highest in almost four years. Gold advanced 0.3 percent to $1,203.11 an ounce.