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Global Stocks Waver Ahead of Trade Talks

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10/07/2019 | 05:56am EDT

By Anna Isaac

-- Chinese markets closed for a holiday

-- U.S. dollar firms

-- Treasury yields tick higher

Global stocks wavered between small gains and losses on Monday, ahead of another round of U.S.-China trade talks and as markets in Hong Kong and mainland China remained shut for a national holiday.

The Stoxx Europe 600 was flat in morning trade, as gains for health-care stocks were balanced by losses in the autos sector after fresh data showed that German manufacturing orders continued to slump in August.

German manufacturing orders declined by 0.6% on the month, official data showed. Economists polled by The Wall Street Journal had forecast a small improvement of 0.2% growth.

The U.S.-China trade row has weighed on Germany's manufacturing and export-heavy economy throughout the year. But the latest figures also showed that domestic demand had weakened, falling 2.6%, while international orders climbed slightly, by 0.9%.

Yields on German 10-year bunds ticked lower to -0.598%. Yields on bonds fall as prices rise.

Meanwhile, a snapshot of European investor sentiment from research firm Sentix slipped in October, falling deeper into negative territory from the month before.

"Investor confidence in the eurozone is still in near free-fall, and last month's tepid rebound is increasingly looking like a dead-cat bounce," said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, in a note.

U.S. economic data have recently suggested that weakness in factories may be spreading to other parts of the economy. Last week the ISM manufacturing index slipped to its lowest reading since 2009, while the services sector dropped to a score of 52.6 in September, its worst reading since August 2016.

Any expectations for a broad trade deal between China and the U.S. had been misguided, said Geoffrey Yu, head of the U.K. investment office at the wealth management arm of UBS.

"I'm surprised expectations were that high in the first place. It was clear that China wanted to separate the tech side of things out and focus on the tariff side of things alone," Mr. Yu said.

Markets have had their hopes pared back, and as a result, even a partial deal might be enough "to help keep things on track," he said. Investors would be watching the attitude of the U.S. consumer, and the agricultural sector in particular, for a positive response to any reduction in trade hostilities, Mr. Yu said.

In Asia, Japan's Nikkei slipped 0.2%, while Korea's Kospi edged up 0.1%.

Chinese Vice Premier Liu He is expected to resume discussions with U.S. counterparts later this week.

Lee Hardman, currency analyst at MUFG, said there had been a number of reports that China may not be as willing to compromise as much as the Trump administration hopes.

"The U.S. would like a trade deal with China, a wide-ranging deal, but those demands look like they're unlikely to be accepted by China. Things like intellectual property rights and other structural issues like state subsidies look unlikely to be resolved," he said. "China may buy more agricultural goods but it's unclear whether or not that partial agreement will be a big enough win for the U.S."

The Chinese offshore yuan was down 0.3% against the dollar, a move some analysts said reflected worsening prospects of a breakthrough in trade relations with the U.S. The offshore yuan could reach a new low if there isn't resolution in trade talks by the end of the year, according to MUFG analysts.

In commodities, global oil benchmark Brent crude edged up 0.3%, and haven asset gold slipped 0.4%.

The yield on the U.S. 10-year Treasury rose to 1.524% on Monday, from 1.515% on Friday.

The WSJ Dollar Index, which measures the currency against a basket of its peers, inched up 0.1%.

Write to Anna Isaac at anna.isaac@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
KOSPI COMPOSITE INDEX -0.31% 2073.28 Real-time Quote.1.87%
NIKKEI 225 -0.09% 22451.86 Real-time Quote.10.95%
US DOLLAR INDEX -0.41% 97.6 End-of-day quote.0.95%
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