US President Donald Trump signed an executive order extending a tariff truce with China by another 90 days, hours before US tariffs on Chinese goods were due to snap back to triple-digit rates. Trump and Russian President Vladimir Putin are due to meet in Alaska on Friday to discuss ending Russia’s war on Ukraine.
On Wall Street, all three main indexes finished lower. Energy, real estate, and technology stocks were the biggest losers while consumer staples, consumer discretionary, and healthcare stocks gained.
The Dow Jones Industrial Average fell 0.45%, the S&P 500 slipped 0.25% and the Nasdaq Composite gave up 0.30%.
In Europe, the STOXX 600 index eased 0.06%. MSCI’s gauge of stocks across the globe was down 0.25% to 938.16, trading near its record high reached in July.
“At the surface level, the market is flat and calm, and it looks like we are in wait-and-see mode to see the economic data we are going to get tomorrow,” said Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey.
“When you look underneath the covers and at the breakdown within the market, you’re getting a little bit more of a selloff.”
The main economic release this week will be US consumer prices on Tuesday, with analysts expecting the impact of tariffs to help nudge the core up 0.3% to an annual pace of 3%, away from the Federal Reserve target of 2%.
An upside surprise would challenge market wagers for a September rate cut, though analysts assume it would have to be a high number given that a downward turn in payrolls is now dominating the outlook.
Markets imply around a 90% probability of a September easing, and at least one more cut by year-end.
The yield on benchmark US 10-year notes dipped 0.2 basis points to 4.281%, while the 30-year bond yield fell 0.5 basis points to 4.8494%.
Trump has repeatedly criticised the Fed for not cutting rates at recent meetings, and markets are eyeing who will succeed current Chair Jerome Powell, whose term ends in May.
This means the dollar’s reaction to the CPI data will not be straightforward, said Paul Mackel, global head of FX research at HSBC.
If the figure indicated higher US tariff price pressures, “that could support the stagflation narrative, and to the dollar’s detriment”, he said, adding that this would also go against the view of some policymakers that tariffs were not causing prices to increase.
“If, however, softer US CPI readings materialise, including the core goods figures, this would likely challenge the dollar too by supporting the case for further Fed easing, and perhaps see greater criticism from the US administration towards Fed Chair Powell.”
The dollar strengthened 0.26% to 148.11 against the Japanese yen and was up 0.47% to 0.812 against the Swiss franc. The euro was down 0.21% against the dollar at US$1.1615. The dollar index rose 0.27% to 98.50.
The Australian dollar eased 0.18% to US$0.6512 ahead of a meeting of the Reserve Bank of Australia, which is widely expected to back a rate cut. It stunned markets in July by skipping an easing of policy to await more inflation data.
Gold prices fell 1.50% to US$3,347.69 an ounce after Trump said tariffs will not be placed on imported gold bars. US gold futures for December delivery settled 2.5% lower at US$3,404.70 an ounce.
Oil prices settled flat as investors looked ahead to talks between Trump and Putin in Alaska on Friday, with U.S. policy towards Russian oil exports in focus.
Brent Lsettled up 0.06% to US$66.63 a barrel, while US crude settled up 0.13% to US$63.96.