August 30, 2019 / 4:09 PM / 16 days ago

REFILE-GLOBAL MARKETS-Stocks edge higher on trade hopes, but yuan softens as tariffs loom

(Removes extraneous words in paragraph 11; fixes price change in gold in paragraph 18)

* China’s yuan on track for biggest monthly decline since 1994

* Wall St stocks lower; German real estate lifts European shares

* Euro falls on expectations of aggressive ECB easing

By April Joyner

NEW YORK, Aug 30 (Reuters) - Hopes of easing trade tensions between China and the United States helped a gauge of global stocks edge higher on Friday despite weakness on Wall Street, though caution over pending U.S. tariffs on Chinese goods put the yuan on track for its biggest monthly decline in 25 years.

Statements from U.S. President Donald Trump and China’s commerce ministry on Thursday that the countries were engaged in trade talks brought some respite to equities, which have been roiled this month by escalating trade tensions, including the announcement of further tit-for-tat tariffs.

The pan-European STOXX 600 rose 0.7%, helped by a surge in German real estate shares, though U.S. stocks gave up early gains. The MSCI All-Country World Index rose 0.23%.

On Wall Street, the Dow Jones Industrial Average rose 12.01 points, or 0.05%, to 26,374.26, the S&P 500 lost 1.44 points, or 0.05%, to 2,923.14 and the Nasdaq Composite dropped 30.32 points, or 0.38%, to 7,943.08.

Friday notwithstanding, MSCI’s gauge of global stocks was on track for its second monthly loss of the year and its biggest August percentage decline since 2015.

Market watchers expressed caution given the fluctuating rhetoric around U.S.-China trade relations. Despite recent conciliatory comments, the Trump administration on Sunday is scheduled to begin collecting 15% tariffs on more than $125 billion in Chinese imports, including smart speakers, Bluetooth headphones and many types of footwear.

China’s yuan fell 0.26% to 7.161 per dollar and was on track for its weakest month since Beijing’s currency reform in 1994.

“The U.S.-China situation is like a prisoner’s dilemma,” said Jeremy Gatto, senior vice president and portfolio manager at Unigestion in Geneva. “The parties have more to gain by cooperating, but they’ve almost gone too far back to find a solution.

“We’ll be living with trade war fears for a while to come,” Gatto said.

In fixed-income markets, U.S. Treasury yields treaded water, with the yield curve between 2-year and 10-year notes still inverted. An inversion of the yield curve is widely seen as a signal that a recession is likely in one to two years.

Benchmark 10-year Treasury notes last yielded 1.5163%, from 1.516% late on Thursday.

Euro zone bond yields were capped by data showing inflation remained at 1.0% in August, well below the European Central Bank’s target.

Italian bond yields were on track for their biggest monthly decline in more than six years after the anti-establishment 5-Star Movement and opposition Democratic Party reached an agreement on a coalition government.

Among currencies, the euro tumbled 0.60% to $1.10 after the low euro zone inflation figure raised expectations for aggressive easing by the ECB.

The dollar index rose 0.32%.

The safe-haven Japanese yen rose 0.21% to 106.28 per dollar and was on track for its biggest monthly gain in three months.

Sterling stabilized at $1.2164 ahead of a crucial period for the British parliament before it is suspended ahead of Britain’s scheduled exit from the European Union on Oct. 31.

In commodities, spot gold was little changed at $1,527.46 an ounce. U.S. crude fell 3.05% to $54.98 per barrel and Brent was last at $60.31, down 1.26% on the day.

Reporting by April Joyner; Additional reporting by Karin Strohecker, Saikat Chatterjee and Josephine Mason in London and Swati Pandey in Sydney; Editing by Shri Navaratnam, Hugh Lawson and Dan Grebler

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