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GLOBAL MARKETS-Trade concerns, earnings haunt equity market rally

Published 26/07/2018, 03:37 am
© Reuters.  GLOBAL MARKETS-Trade concerns, earnings haunt equity market rally
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* Stocks struggle to add a fourth day of gains

* Trade in focus as General Motors earnings take hit

* Trump and European Commission chief Juncker to meet

By Trevor Hunnicutt

NEW YORK, July 25 (Reuters) - A three-day world stock market rally threatened to stall on Wednesday as investors fretted over the impact of tariffs on corporate earnings and awaited a meeting between U.S. and European officials that could inflame a trade war.

Disappointing results from Boeing (NYSE:BA) Co BA.N and General Motors Co (NYSE:GM) GM.N held back Wall Street a day after the benchmark S&P 500 index hit a five-month high, with U.S. President Donald Trump and European Commission chief, Jean Claude-Juncker, set to meet at 1:45 p.m. Eastern time (1745 GMT).

Market participants' focus returned to what may happen with tariffs after EU Trade Commissioner Cecilia Malmstrom told a Swedish newspaper on Wednesday the bloc was preparing $20 billion of levies on U.S. goods if Washington imposes them on imported cars. have seen a lot of complacency over this entire trade war so the question is, unless we see a very negative outcome (from the EU-U.S. meeting), are we going to see a marked reaction?" Rabobank strategist Bas Van Geffen said.

"It is an odd one where two key trade partners, but also two key allies, are now fighting each other."

Amid the busiest reporting week for S&P 500 companies, a European Central Bank meeting and U.S. GDP figures still to come this week, there is scope for volatility. Facebook Inc FB.O reports results later on Wednesday.

Trade tensions are already hurting shares. General Motors GM.N fell 7.42 percent after the automaker cut its 2018 earnings forecast, citing rising steel and aluminum costs due to U.S. tariffs.

Sales of new U.S. single-family homes fell to an eight-month low in June and data for the prior month was revised sharply lower, the latest indications that the housing market was slowing down. PHLX housing index .HGX fell nearly 2 percent, while the overall U.S. stock market was mixed. .N

The Dow Jones Industrial Average .DJI fell 51.61 points, or 0.2 percent, to 25,190.33, the S&P 500 .SPX gained 4.23 points, or 0.15 percent, to 2,824.63 and the Nasdaq Composite .IXIC added 30.91 points, or 0.39 percent, to 7,871.68. .N

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.11 percent.

The dollar index, which measures the greenback against a basket of six other major currencies .DXY , fell 0.05 percent, further scaling down from its July 19 peak for the year, when Trump suggested it had grown too strong. FRX/

Richard Bernstein, chief executive of Richard Bernstein Advisors LLC, said tariffs and a weak-dollar policy only exacerbate pressure on company profits.

"I'm very surprised that analysts have not factored any of this in - that people are shocked that tariffs are inflationary," said Bernstein.

Gold, used as a guard against inflation, added 0.4 percent to $1,228.77 an ounce on the spot market XAU= .

The yield on the 10-year Treasury note US10YT=RR , a benchmark for global borrowing costs, eased off a one-month peak of 2.973 percent hit on Tuesday.

Bond investors have been whipsawed by speculation the Bank of Japan could start unwinding stimulus and by bets that the gap between short and long-term bond yields might widen if Trump pressures the Federal Reserve to ease off rate hikes. The latter wager - on a "steeper" yield curve - unwound for a second straight day.

Benchmark 10-year notes last rose 4/32 in price to yield 2.9356 percent, and the gap between the 2- and 10-year benchmarks fell 3.5 points to 27.7 basis points.

Oil prices rose for a second day after U.S. crude inventories fell to the lowest since February 2015, easing worries about oversupply. O/R

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