By Rodrigo Campos
NEW YORK (Reuters) – Gold prices rose to a 10-month high on Tuesday as concerns over a global economic slowdown spurred a safe-haven bid and were also supported by a weaker U.S. dollar, which fell on optimism for a breakthrough in U.S.-China trade talks.
A gauge of global stock markets rose modestly along with gains on Wall Street, while Europe sagged under falling bank shares and concerns that a car tariff could hurt the region’s exports to the United States.
Traders kept a close eye on the new round of talks between the United States and China to resolve their trade spat. Separately, the World Trade Organization warned that a slump of its leading indicator of world trade in goods to its lowest reading in nine years could foreshadow a broader economic downturn, as it highlighted the need to reduce trade tensions.
“The rivalry between the U.S. and China is deep-seated, and tensions will remain even if the current round of talks succeed,” Vincent Heaney, a strategist at UBS Global Wealth Management, said in a client note.
“With global growth and earnings also slowing, we favor only a modest overweight to global stocks.”
The Dow Jones Industrial Average rose 8.07 points, or 0.03 percent, to 25,891.32, the S&P 500 gained 4.16 points, or 0.15 percent, to 2,779.76 and the Nasdaq Composite added 14.36 points, or 0.19 percent, to 7,486.77.
The pan-European STOXX 600 index lost 0.22 percent and MSCI’s gauge of stocks across the globe gained 0.20 percent.
Emerging market stocks rose 0.13 percent. MSCI’s index of Latin American equities bucked the trend in stocks globally with a 1.2 percent increase, mostly on the back of a 1 percent gain in the Brazilian market.
Gold prices surged to a near 10-month high driven by concerns over slowing global growth as dovish signals from Japan and Europe’s central banks followed weak data from the United States and China.
Spot gold added 1.1 percent to $1,341.02 an ounce. U.S. gold futures gained 1.66 percent to $1,344.10 an ounce.
In currencies, the yen was little changed even after Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to ramp up stimulus if the stronger yen derails the path toward its 2 percent inflation target.
The offshore Chinese yuan touched its strongest level against the dollar since Feb. 1 following a Bloomberg TV report that the United States is pressing to secure a pledge from China that it will not devalue its yuan as a part of a trade deal.
The dollar index fell 0.41 percent, with the euro up 0.28 percent to $1.134.
“We are hoping to hear more positive news on trade,” said Dean Popplewell, chief currency strategist at Oanda in Toronto. “The dollar should come under pressure as it loses some safe-haven appeal.”
Sterling rose over 1 percent versus the greenback on hopes that Prime Minister Theresa May will make progress in seeking changes to her Brexit deal with the European Union, although some traders struggled to explain the size of the move.
The British currency was last trading at $1.3063, up 1.10 percent on the day.
The Swedish crown pared losses against the dollar after hitting a more than two-year low of 9.417 after inflation data came in decidedly weak just two months after a milestone rate hike, dimming prospects of further tightening. The crown lost 0.46 percent versus the U.S. dollar at 9.303.
U.S. crude rose 0.79 percent to $56.42 per barrel and Brent was last at $66.47, down 0.05 percent on the day.
Benchmark 10-year notes last rose 8/32 in price to yield 2.6393 percent, from 2.666 percent late on Friday. The 30-year bond last rose 11/32 in price to yield 2.9802 percent, from 2.997 percent late on Friday.
(GRAPHIC: Global assets in 2019 – http://tmsnrt.rs/2jvdmXl)
(GRAPHIC: Global currencies vs. dollar – http://tmsnrt.rs/2egbfVh)
(Reporting by Rodrigo Campos; Additional reporting by Richard Leong, Laila Kearney and Kate Duguid in New York, Alex Lawler and Marc Jones in London, Shreyashi Sanyal in Bengaluru; Editing by Leslie Adler and Susan Thomas)