Stocks slip as focus shifts to trade; dollar falls

[LONDON] Stocks in Europe followed Asian peers lower as investors began to switch their attention away from the Federal Reserve and back to earnings and the outlook for global trade. The US dollar dropped after rising for three days.

European shares retreated following Wednesday's rally, with insurance companies leading the decline and most industry groups in the red. In Asia, Hong Kong stocks underperformed just as Chinese smartphone maker Xiaomi. filed for what's expected to be the world's biggest IPO since 2014. The yield on 10-year Treasuries edged higher as the greenback slid from its highest since January.

The US begins trade talks in China on Thursday, with both sides dialing back expectations. Beijing won't agree to preconditions that include abandoning its advanced manufacturing program and agreeing to cut the trade gap by a fixed amount, a Chinese official said. American delegates said earlier that a breakthrough is unlikely, and they might leave early if unsatisfied.

"When you think about the things that have been weighing on the market -- the potential for trade war with China, Nafta breaking up, rising rates and of course the potential rolling over in growth -- I think the one that is really weighing the most heavily is trade and that's why the market tends to swing the most violently on every new piece of news," RiverFront Investment Group Chairman Michael Jones told Bloomberg TV.

On Wednesday, Fed officials may have signalled their willingness to allow inflation to exceed their 2 per cent goal somewhat by adding a reference to the "symmetric" nature of their target. The Federal Open Markets Committee also noted a soft patch in growth in the first quarter, removing a reference in the March statement that the economic outlook had "strengthened in recent months." They balanced that out by noting strong growth in business investment.

Elsewhere, oil edged lower as a rise in stockpiles overshadowed concerns about US sanctions on Iran.

Some key events coming up during the remainder of this week:

Eurozone producer prices are scheduled for Thursday.

The European Commission will present its spring economic forecasts, including growth, inflation, debt and deficit projections.

Payroll gains in the US probably picked up in April, with the unemployment rate forecast to drop to 4 per cent, according to surveys of economists before the data reports due Friday.

Earnings season continues, including Adidas on Thursday, then Alibaba and HSBC on Friday.

Reserve Bank of Australia releases its quarterly update of growth and inflation forecasts on Friday.

Berkshire Hathaway holds its annual shareholders meeting in Omaha, Nebraska on Saturday.

And these are the main moves in markets:

Stocks

The Stoxx Europe 600 Index fell 0.2 per cent as of 8.06am London time, headed for the largest fall in more than a week.

Futures on the S&P 500 Index gained 0.1 per cent.

The MSCI All-Country World Index dipped 0.1 per cent to the lowest in more than a week.

The UK's FTSE 100 Index decreased 0.1 per cent, the first retreat in more than a week.

Germany's DAX Index fell 0.1 per cent, the first retreat in more than a week.

The MSCI Emerging Market Index decreased 0.7 per cent to the lowest in more than a week.

The MSCI Asia Pacific Index dipped 0.3 per cent to the lowest in a week.

Currencies

The Bloomberg Dollar Spot Index fell 0.2 per cent.

The euro gained 0.1 per cent to US$1.1968.

The British pound climbed 0.1 per cent to US$1.3587, the first advance in more than a week.

The Japanese yen increased 0.1 per cent to 109.73 per US dollar.

Bonds

The yield on 10-year Treasuries gained one basis point to 2.98 per cent, the highest in a week.

Germany's 10-year yield climbed one basis point to 0.59 per cent, the highest in a week.

Britain's 10-year yield gained one basis point to 1.457 per cent, the highest in a week.

Commodities

West Texas Intermediate crude fell 0.2 per cent to US$67.81 a barrel.

Copper climbed 0.1 per cent to US$3.07 a pound.

Gold increased 0.2 per cent to US$1,306.92 an ounce.

BLOOMBERG