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Global political tensions flatten yields, roil stocks

Reuters  |  NEW YORK 

By Nick Brown

NEW YORK (Reuters) - Simmering political tensions roiled stocks and bonds across the globe on Wednesday, with U.S. yield curves continuing to flatten and stock markets losing ground as industrial companies took a beating.

Despite strong economic data out of and the this week, stock markets could not shake a hangover from Tuesday's that U.S. was looking to impose tariffs on up to $60 billion of Chinese imports.

Trump also spooked investors on Tuesday by of State Rex Tillerson, who was viewed as a supporter of free trade. Together, those moves worried some investors about a global trade war.

On Wednesday, the said it would retaliate after 23 of its were expelled by British over a on a former Russian double agent in England that May blamed on

That helped continue a trend of flattening yield curves on bonds, with the spread between two- and 10-year Treasury yields down 2.6 basis points to 55.7 basis points from Tuesday's close.

The spread between five- and 30-year yields was down 2.8 basis points to 55.7 basis points.

Benchmark 10-year notes last rose 10/32 in price to yield 2.8116 percent, from 2.848 percent late on Tuesday.

The 30-year last rose 30/32 in price to yield 3.0527 percent, from 3.101 percent Tuesday.

Germany's 10-year government yield fell to a 1-1/2-month low on trade war fears, while Italian borrowing costs rose after right-wing reiterated his party's view that the euro was a flawed currency.

Salvini also said he was open to forming any sort of coalition government as long as it did not include the

Salvini's comments, along with the ongoing trade war concerns, sent European stocks slightly into the red despite a banner day for and a strong showing for stocks.

Adidas, the German sports fashion company, gained more than 11 percent on Wednesday after announcing a share buyback of up to 3 billion euros.

But the pan-European index <.FTEU3> lost 0.14 percent and MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.42 percent.

On Wall Street, the Dow Jones was down around 1 percent, thanks in part to hefty losses at industrial companies like , which had been down more than 4 percent before regaining some ground Wednesday afternoon.

That was despite encouraging economic that had spurred the U.S. indexes to open higher on Wednesday morning.

reported industrial output expanding at a surprisingly faster pace at the start of the year. Fixed asset investment also beat forecasts, while improved.

Political uncertainty outweighed that, said Paul Nolte, at in "Given the rearrangement that [Trump] has made to his cabinet ... it's being read as a lot more protectionist now than it was two weeks ago."

The <.DJI> fell 238.52 points, or 0.95 percent, to 24,768.51, the <.SPX> lost 14.81 points, or 0.54 percent, to 2,750.5 and the <.IXIC> dropped 14.93 points, or 0.2 percent, to 7,496.08.

Emerging market stocks <.MSCIEF>, meanwhile, lost 0.40 percent.

were choppy, up slightly in the afternoon after losing ground through the morning.

U.S. crude rose 0.31 percent to $60.90 per barrel and Brent was last at $64.82, up 0.28 percent.

The dollar index <.DXY> rose 0.06 percent, with the euro down 0.14 percent to $1.2372.

Graphic: Global trade and GDP growth - China's trade with the -

(Additional reporting by Sujata Rao, Sruthi Shankar and Kate Duguid; Editing by and James Dalgleish)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, March 15 2018. 02:26 IST