Shares, dollar dip as limp results, impeachment inquiry offset trade hopes

LONDON (Reuters) – Shares in Europe dipped, Wall Street backed off record highs and the U.S. dollar was poised to extend a three-day losing streak as underwhelming earnings and uncertainty over an ongoing U.S. impeachment inquiry overshadowed hopes for a U.S.-China trade deal.

The U.S. benchmark S&P 500 index was nominally lower and Home Depot Inc (HD.N) pulled the blue-chip Dow Jones Industrial index firmly into the red after the home improvement retailer cut its 2019 sales forecast.

Talks continued between the world’s two largest economies on an interim deal toward resolving their 18-month, market-rattling trade dispute that has damaged supply chains and upset global markets, even as Washington is set to impose a new round of tariffs on Chinese goods on Dec. 15.

But as the impeachment hearings in the U.S. House of Representatives gained momentum, the end game of the U.S.-China trade war grew increasingly foggy. The inquiry focuses on a July 25 phone call in which President Donald Trump asked Ukrainian President Volodymyr Zelenskiy to carry out two investigations that would benefit him politically.

“There’s a lot of pontification that (President Trump) needs a trade deal,” said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York. “And given the impeachment that’s going on phase 1 is likely but he can’t give up too much or he’ll lose face.”

“The impeachment inquiry is being paid special attention to by the Chinese,” Pavlik added. “It puts the president in a less powerful position. He’s somewhat disarmed and they know he has to reach some kind of agreement to get re-elected.”

The Dow Jones Industrial Average .DJI fell 79.52 points, or 0.28%, to 27,956.7, the S&P 500 .SPX lost 2.73 points, or 0.09%, to 3,119.3 and the Nasdaq Composite .IXIC added 12.52 points, or 0.15%, to 8,562.46.

Hopes of a trade truce earlier in the day drove European stocks to a four-year high and world stocks to their highest in nearly two years, but those gains were pared later in the session.

The pan-European STOXX 600 index lost 0.06% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.01%.

Emerging market stocks rose 0.42%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.64% higher, while Japan’s Nikkei .N225 lost 0.53%.

Long-dated U.S. Treasury yields slipped for the seventh straight day as risk appetite weakened.

Benchmark 10-year notes US10YT=RR last rose 4/32 in price to yield 1.7946%, from 1.808% late on Monday.

The 30-year bond US30YT=RR last rose 16/32 in price to yield 2.2704%, from 2.293% late on Monday.

The dollar was nominally lower against a basket of major world currencies, giving up early gains. The dollar index .DXY, tracking it against six major peers, fell 0.02%, with the euro EUR= up 0.11% to $1.1082.

The Japanese yen strengthened 0.12% versus the greenback at 108.56 per dollar, while Sterling GBP= was last trading at $1.2938, down 0.11% on the day.

The protracted trade negotiations continue to weigh on crude prices, with Brent crude oil futures dipping below $62 per barrel.

U.S. crude CLcv1 fell 1.93% to $55.95 per barrel and Brent LCOcv1 was last at $61.51, down 1.49% on the day.

Spot gold XAU= rose 0.08% to $1,470.56 an ounce.

Copper CMCU3 rose 0.53% to $5,861.00 a tonne.

Three-month aluminum on the London Metal Exchange CMAL3 lost 0.46% to $1,730.00 a tonne.

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