NEW YORK (Reuters) – Hopes for a thaw in the U.S.-China trade war helped a gauge of global stocks edge higher on Friday despite weakness on Wall Street, though caution over pending U.S. tariffs on Chinese goods put the yuan on track for its biggest monthly decline in 25 years.
Statements from U.S. President Donald Trump and China’s commerce ministry on Thursday that the countries were engaged in trade talks brought some respite to equities, which have been roiled by the escalating trade war.
The pan-European STOXX 600 ended 0.7% higher, helped by a surge in German real estate shares. The MSCI All-Country World Index rose 0.19%.
On Wall Street, the Dow Jones Industrial Average fell 22.89 points, or 0.09%, to 26,339.36, the S&P 500 lost 4.5 points, or 0.15%, to 2,920.08 and the Nasdaq Composite dropped 36.01 points, or 0.45%, to 7,937.38.
U.S. markets will be closed on Monday for the Labor Day holiday.
Despite the day’s gains, MSCI’s gauge of global stocks was on track for its second monthly loss of the year and its biggest August percentage decline since 2015.
Some market watchers expressed caution given the fluctuating rhetoric. Despite recent conciliatory comments, the Trump administration on Sunday is scheduled to begin collecting 15% tariffs on more than $125 billion in Chinese imports, including smart speakers, Bluetooth headphones and many types of footwear.
China’s yuan fell 0.30% to 7.1637 per dollar and was on track for its weakest month since Beijing’s currency reform in 1994.
New trade developments ahead of the re-opening of U.S. financial markets on Tuesday could sway sentiment, said Ken Polcari, managing principal at Butcher Joseph Asset Management in New York.
“Tariffs are being implemented on Sept. 1 from the U.S.,” Polcari said. “The fact is (China) very well could retaliate, and no one should be surprised if they do. With an extra day of no trading, it could be that kind of news that causes a disruption to the market.”
U.S. Treasury yields treaded water, with the yield curve between 2-year and 10-year notes still inverted, seen as a signal that a recession is likely in one to two years.
Benchmark 10-year Treasury notes last rose 1/32 in price to yield 1.5129%, from 1.516% late on Thursday.
Italian bond yields registered one of their biggest monthly decline in more than six years after the anti-establishment 5-Star Movement and opposition Democratic Party reached an agreement on a coalition government.
Among currencies, the euro reached its weakest level since May 2017 as expectations grew for aggressive easing by the European Central Bank following weak economic data on Thursday. The euro was last 0.73% lower at $1.10.
The dollar index rose 0.43%.
The safe-haven Japanese yen rose 0.23% to 106.26 per dollar and was on track for its biggest monthly gain since May.
Sterling fell 0.34% to $1.2146 ahead of a crucial period for the British parliament before it is suspended ahead of Britain’s scheduled exit from the European Union on Oct. 31.
In commodities, spot gold fell 0.33% to $1,522.41 an ounce but was set for its fourth straight month of gains. Silver rose 0.52% to $18.33 and was on track for its biggest monthly percentage gain since June 2016.
Oil prices fell on concerns that disruption from Hurricane Dorian, headed for Florida, could dampen demand. U.S. crude settled 2.84% lower at $55.10 a barrel, while Brent settled at $60.43 a barrel, down 1.06% on the day.
Reporting by April Joyner; Additional reporting by Stephanie Kelly and Kate Duguid in New York, Asha Sistla in Bengaluru, Karin Strohecker, Saikat Chatterjee and Josephine Mason in London and Swati Pandey in Sydney; Editing by Dan Grebler and David Gregorio