Oil Prices Tumble Amid US-China Trade Uncertainty Oil prices tumbled Tuesday as lingering questions over the US-China trade talks weighed on sentiment on a mixed day for global equity markets.
Both US benchmark West Texas Intermediate and London's Brent oil fell sharply on signs Beijing and Washington may be drifting further apart again.
Worries about the trade war have weighed on the global growth outlook, crimping petroleum demand. Analysts are also on edge ahead of a weekly US oil inventory report that is expected to show higher stockpiles.
"The lack of breakthrough or concrete progress on an initial US-China deal continues to create headwinds, particularly after both sides had offered indications that a signed phase one agreement was seemingly imminent only a few weeks earlier," said a note from Robbie Fraser, senior commodity analyst at Schneider Electric.
The latest hang-up in talks has been signs that China will agree to a "phase one" agreement only if Washington agrees to remove some existing tariffs, something US President Donald Trump has opposed.
At the close, European stocks were mixed after giving up most or all of their earlier gains, while Wall Street finished mostly lower, with the Dow and S&P 500 retreating from records, even as the Nasdaq notched a third straight all-time high.
- Home Depot slumps -
The Dow was weighed down by a more than five percent drop in Home Depot shares as it slashed its full-year sales forecast, saying the payoff from investments in e-commerce and other ventures was taking longer than expected.
Despite that disappointment, analysts took heart in other aspects of the Home Depot report, including a 3.6 percent increase in comparable sales.
They also cited better-than-expected US home construction data.
"The economy seems to be settling into a trend level growth pattern of something in the 2% range," economist Joel Naroff said in a client note.
"An improvement in home construction would help offset what is likely to be a slowdown in consumption to a more sustainable pace.
"The major unknown remains the trade tensions," he added.
Earlier, Hong Kong's main stocks index extended Monday's rally with another surge but continuing protests in parts of the city -- particularly a violent standoff at a university -- remained a source of worry.
The gains come as the widespread protests that hammered the city's transport network last week appear to have become less disruptive over the past two days.
The pound, meanwhile, retreated after strong gains on Monday, with expectations that British Prime Minister Boris Johnson's ruling Conservative party will win next month's general election with a healthy majority, helping him to push through his Brexit deal.
- Key figures around 2140 GMT -
New York - Dow: DOWN 0.4 percent at 27,934.02 (close)
New York - S&P 500: DOWN 0.1 percent at 3,120.18 (close)
New York - Nasdaq: UP 0.2 percent at 8,570.66 (close)
London - FTSE 100: UP 0.2 percent at 7,323.80 (close)
Frankfurt - DAX 30: UP 0.1 percent at 13,221.12 (close)
Paris - CAC 40: DOWN 0.4 percent at 5,909.05 (close)
EURO STOXX 50: DOWN 0.2 percent at 3,696.56 (close)
Tokyo - Nikkei 225: DOWN 0.5 percent at 23,292.65 (close)
Hong Kong - Hang Seng: UP 1.6 percent at 27,093.80 (close)
Shanghai - Composite: UP 0.9 percent at 2,933.99 (close)
Euro/dollar: UP at $1.1077 from $1.1072 at 2100 GMT
Pound/dollar: DOWN at $1.2922 from $1.2953
Euro/pound: UP at 85.71 pence from 85.48 pence
Dollar/yen: DOWN at 108.54 yen from 108.68 yen
Brent North Sea crude: DOWN 2.5 percent at $60.91 per barrel
West Texas Intermediate: DOWN 3.2 percent at $55.21 per barrel
Fed's Powell Said No 'Warning Signs' in US Economy The US economy is a global standout at the moment, showing none of the signs of trouble that have preceded other recessions, at least not yet, Federal Reserve chief Jerome Powell said Thursday.
On a day when Germany and China each reported growth in the latest quarter of just 0.1 percent, Powell said, "the US economy is the star economy these days" with growth of about two percent.
And "there is no reason to think that cannot continue," he told the House Budget Committee, quickly adding that he was worried about "jinxing" the outlook.
In the final day of back-to-back appearances before Congress, Powell noted that while US manufacturing is in recession -- partly due to lingering trade tensions -- the consumer remains strong.
Consumer spending makes up 70 percent of the US economy and that has remained healthy, as wages have risen modestly and unemployment is at 50-year lows, bringing more Americans into the labor market, he said.
"That is what drives the economy," Powell said. But he said the Fed is monitoring "very carefully" to see if the tariff impact spills over to affect consumers.
The Fed raised the benchmark lending rate four times last year when the US economy appeared to be picking up steam. But as President Donald Trump's aggressive trade conflicts hit business investment and slowed manufacturing, the central bank reversed course and cut rates three times this year.
Powell reaffirmed in his two congressional appearances this week that the Fed will stand pat for a time to see how the economy develops.
But with the US expansion now in its 11th year, "in principle, there is no reason why it can't last. At the risk of jinxing us."
As the Fed carefully monitors financial markets and different sectors of the economy, "we don't see the kind of warning signs that appear in other cycles yet," he said.
Fed's Powell Sees Steady Growth, Signals Pause in Rate Cuts
By Christopher Rugaber
Federal Reserve Chairman Jerome Powell said Wednesday that the Fed is likely to keep its benchmark short-term interest rate unchanged in the coming months, unless the economy shows signs of worsening.
But for now, in testimony before a congressional panel, Powell expressed optimism about the U.S. economy and said he expects it will grow at a solid pace, though it still faces risks from slower growth overseas and trade tensions.
``Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labour market, and inflation near our symmetric 2% objective as most likely,'' Powell said before Congress' Joint Economic Committee.
Fed policymakers are unlikely to cut rates, Powell said, unless the economy slows enough to cause them to make a ``material reassessment'' of their outlook.
The Fed cut short-term rates last month for the third time this year, to a range of 1.5% to 1.75%.
``It now looks increasingly likely that the Fed will move to the sidelines for an extended period,'' said Andrew Hunter, an economist at Capital Economics, a forecasting firm.
Still, when asked if he expected rates to remain unchanged over the next year, Powell said, ``I wouldn't say that at all.''
Powell's testimony comes a day after President Donald Trump took credit for an ``economic boom'' and attacked the Fed for not cutting interest rates further. Powell and other Fed officials, however, argue that their rate cuts, by lowering borrowing costs on mortgages and other loans, have spurred home sales and boosted the economy.
Powell was asked about negative interest rates, which Trump also called for Tuesday, and responded that they ``would certainly not be appropriate in the current environment.''
Negative rates occur ``at times when growth is quite low, and inflation is quite low, and you really don't see that here,'' Powell said.
Other Fed officials have also questioned whether cutting rates below zero has actually succeeded in boosting growth in places like Europe and Japan, where central banks have pushed rates into negative territory.
Despite Trump's attacks, both Republican and Democratic lawmakers took a largely respectful approach to Powell. Several complimented him for the ``Fed Listens'' events the central bank has held around the country, which have sought input from a range of groups, including unions and nonprofits, on ways the Fed could update its monetary policy framework.
Powell repeatedly demurred when Sen. Ted Cruz, R-Texas, pressed him on how higher tax rates would affect the economy, including wealth taxes that have been proposed by Democratic presidential candidates Elizabeth Warren and Bernie Sanders.
But Powell did concede, under questioning from Cruz, that a ban on fracking would ``not be a good thing for the economy.'' Some Democrats have called for a fracking ban over environmental concerns about the controversial method for drilling for oil and gas.
Recent data suggests that growth remains solid if not spectacular. The economy expanded at a 1.9% annual rate in the July-September quarter, down from 3.1% in the first three months of the year. The unemployment rate is near a 50-year low of 3.6% and hiring is strong enough to potentially push the rate even lower.
Inflation, according to the Fed's preferred gauge, is just 1.3%, though it has been held down in recent months by lower energy costs and most Fed officials expect it to move higher in the coming months.
Yet Powell reiterated that higher tariffs from the Trump administration's trade war with China and uncertainty over potential future duties have caused many businesses to delay or cut back on their spending on large equipment and buildings. That has slowed economic growth.
Powell also urged Congress to lower the federal budget deficit so that lawmakers would have more flexibility to cut taxes or boost spending to counter a future recession.
Other Fed officials have voiced similar concerns. Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said Tuesday that the large deficit, and the constraints it imposes on Congress in the event of a recession, ``is one of the things I do lose sleep over.''
Powell also noted that with the Fed's benchmark rate at historically low levels, the central bank is considering whether it needs new tools to help boost growth whenever the next downturn arrives.
``Central banks around the world are going to have less room to cut in this new normal of low rates and low inflation,'' he said.
The Fed is exploring an alternative policy framework, Powell said, that it hopes will provide more flexibility. In typical recessions, the Fed cuts short-term rates by roughly 5 percentage points.
Powell reiterated that the Fed believes the unemployment rate could fall further without necessarily pushing inflation higher, a view that suggests the central bank is a long way off from hiking rates.
``The data is not sending any signal that the labour market is so hot or that inflation is moving up,'' he said in response to a question from New York Rep. Carolyn Maloney, a Democrat and vice chair of the Joint Economic Committee. ``What we have learned ... is that the U.S. economy can operate at a much lower level of unemployment than many thought.''
Historically, super-low unemployment has been seen as likely to push up inflation, as workers push for higher pay and companies offer greater salaries to find and keep workers.
Most analysts forecast that the Fed will hold rates steady when it meets next month. But some economists expect growth will slow in the coming months and the Fed will likely have to cut again next year.
AP Economics Writer Martin Crutsinger contributed to this report.
The Canadian Press & the Associated Press. All rights are reserved.