Equities edge lower as tariffs, inflation data and earnings weigh

By Sinead Carew and Nell Mackenzie

MSCI's global equity index edged down on Monday and US Treasury yields edged higher as the latest US tariff threats kept investors on edge while they waited for inflation readings and the start of earnings season due later in the week.

The euro briefly hit an almost three-week low while the dollar index held steady after US President Donald Trump's threat to impose a 30 per cent tariff on imports from the European Union and Mexico from August 1.

European shares fell on Monday after the tariff threat. The EU said it would extend a suspension of countermeasures to US tariffs until early August and continue to press for a negotiated settlement, though Germany's finance minister called for firm action if the levies went ahead.

 

The latest tariff salvo comes as US earnings season begins this week, with the major banks leading the pack. S&P 500 profits are expected to rise 5.8 per cent from the year-ago quarter, according to LSEG data.

"It's all about earnings season now. People are not sure what it's going to hold. They want to be optimistic. Usually earnings season pans out better than expected," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, but he noted that trading valuations are "a bit expensive relative to the five-year average."

"That on top of the most recent tariff announcements has people sort of just waiting on the sidelines," said the money manager.

On Wall Street at 10:54 a.m. the Dow Jones Industrial Average fell 53.36 points, or 0.12 per cent, to 44,318.15 while the S&P 500 fell 6.66 points, or 0.11 per cent, to 6,253.09.

The Nasdaq Composite rose 18.05 points, or 0.09 per cent, to 20,603.58.

MSCI's gauge of stocks across the globe fell 1.07 points, or 0.12 per cent, to 921.49 while the pan-European STOXX 600 index fell 0.26 per cent.

PRESSURING POWELL

While US Federal Chair Jerome Powell has signalled a patient outlook on interest rate cuts, Trump is piling up political pressure for more aggressive easing.

White House economic adviser Kevin Hassett over the weekend warned Trump might have grounds to fire Powell because of renovation cost overruns at the Fed's Washington headquarters.

Trump said on Sunday that it would be a great thing if Powell stepped down.

In US treasuries, the yield on benchmark US 10-year notes rose 1 basis point to 4.433 per cent, from 4.423 per cent late on Friday while the 30-year bond yield rose 2.2 basis points to 4.9791 per cent.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.8 basis points to 3.896 per cent, from 3.914 per cent late on Friday.

Besides earnings season, investors are also waiting for US consumer price data for June, due on Tuesday, and will monitor for any upward pressure from tariffs.

They will also watch for any tariff impact to supply chain costs in producer price and import price figures also due this week along with a view of consumer health in retail sales data.

In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.09 per cent to 97.98.

The euro was down 0.08 per cent at $1.168 while against the Japanese yen, the dollar strengthened 0.07 per cent to 147.51.

The Mexican peso weakened 0.65 per cent versus the dollar at 18.767, with Mexican President Claudia Sheinbaum confident a trade deal could be reached before the August deadline.

Bitcoin crossed the $120,000 level for the first time and was last up 1.48 per cent at $120,891.36.

Oil prices fell on Monday after touching their highest level in three weeks, as investors eyed further US sanctions on Russia and the threat of tariffs that may affect global supplies.

US crude fell 0.64 per cent to $68.01 a barrel and Brent fell to $70.07 per barrel, down 0.41 per cent on the day.

Gold prices steadied after hitting a three-week peak on Monday with attention on trade talks and US economic data, while silver climbed to its highest level since September 2011.

Spot gold fell 0.41 per cent to $3,341.63 an ounce. US gold futures rose 0.04 per cent to $3,357.20 an ounce.