US stock markets retreat on Tuesday while global markets strengthen

  • S&P 500 struggles to break past 2,900, thirty-year bond yields drop 0.6 basis points
  • Investors keeping a close eye on how trade war is panning out
  • Trump threatens to raise tariffs on Chinese imports further

US stock markets retreated slightly yesterday despite China’s announcement that it was poised to introduce fiscal stimulus measures to boost infrastructure spending across the country. After that, Treasury yields also dropped from their session high. 

Thirty-year bond yields fell 0.6 basis points, while two-year note yields increased by 2.2 basis points.

On Monday, Xinhua, China’s official news agency, stated that financial institutions and governments should use special bonds to boost infrastructure spending across the country. Although China and the US are in the middle of a nasty trade war right now, global investors have been keenly monitoring what the country will do to re-ignite the lackluster global economy.

On Monday, President Trump told China that he will expand tariffs to another $300 billion of its products if President Xi Jinping does not meet with him at the upcoming G20 meeting.

The S&P 500 SPX initially strengthened yesterday, but later found it difficult to exceed the 2,900 level. Internationally, however, stock markets fared much better. In China, the CSI 300 index ended 3% up, while Europe’s STOXX 600 strengthened by 0.7%.

The sale of $38 billion 3-year notes by the Treasury Department was well received by investors, with the bid-to-cover ratio at one stage reaching 2.62. 

Analysts believe the positive reaction to the auction might reflect the market’s expectation for more rate cuts before the end of the year.

Bleakley Advisory Group CIO Peter Boockvar said: “Too early to say for June and July but it’s certainly a message and belief where interest rates are likely going in the next few years on the short end. In this case, that means lower.” 

In other data, producer prices in the US went up by 0.1% last month, while the NFIB’s small-business optimism index reached 105, which is a seven-month high.