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US stocks retreat as China seeks more talks; pound slips as Brexit hopes dim


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US stocks retreat as China seeks more talks; pound slips as Brexit hopes dim

Trump touts US-China partial deal, but China's response raises uncertainty.

➤ Mnuchin says there is fundamental trade agreement.

US stocks retreat; European shares trade lower.

➤ Sterling falls as EU says more work needed for Brexit deal.

➤ Brent crude oil declines 2.3%.

U.S. stocks retreated as China reportedly sought more talks before a partial trade agreement touted by President Donald Trump could be signed, and sterling slipped as hopes for a Brexit deal dimmed.

The S&P 500 slipped about 0.1% around 9:30 a.m. ET. The index closed last Friday's session 1.1% higher, after Trump's announcement.

U.S. Treasury Secretary Steven Mnuchin said Oct. 14 there is "a fundamental agreement" between the two camps, subject to documentation, after reports emerged that China sought more talks to finalize details ahead of a summit in Chile, where the deal could be signed.

In a statement, China said both sides made "substantial progress" in a number of areas, including agriculture and intellectual property, but did not mention any deal being reached.

"We think there are probably some important disagreements on the terms of a deal, which could include the yuan mechanism," wrote Iris Pang, Greater China Economist at ING.

Trump said Oct. 11 that the partial deal included $40 billion to $50 billion in new agriculture trade as well as provisions on intellectual property and financial services. The agreement prevents a rise in tariffs on Chinese goods from taking effect tomorrow, though the levies scheduled to go into effect Dec. 15 remain on the table.

Trump said phase one of the deal would take five weeks to write, while the second phase would begin "almost immediately."

While the partial agreement will likely ease concerns about a further escalation of trade tensions, the deal is still tentative, and tensions between the two sides remain high, said Tommy Wu, economist at Oxford Economics, and Louis Kuijs, head of Asia economics. They noted that concessions on China's industrial policies and the U.S. ban on Huawei Technologies Co. Ltd. are yet to be finalized, indicating hurdles in future trade talks.

European bourses were trading lower. The FTSE 100 was down 0.6%, Germany's DAX declined 0.4% and France's CAC 40 fell 0.6%.

The World Trade Organization officially allowed the U.S. to trigger duties on up to $7.5 billion in EU imports in response to EU subsidies awarded to aircraft maker Airbus SE, which was down 0.8%.

In Asia, the Shanghai SE Composite advanced 1.2% and Hong Kong's Hang Seng gained 0.8%. Japanese markets were closed for a holiday.

China's foreign trade surplus widened in September from the prior month, though both exports and imports saw worse-than-expected annual declines.

In currencies, sterling declined 0.7% versus the dollar as the EU cast doubt on a withdrawal agreement being reached at a summit later this week, saying "a lot of work remains to be done."

The euro fell 0.2%, while the Japanese yen was little changed. The Singaporean dollar appreciated 0.3% versus its U.S. counterpart after the Monetary Authority of Singapore eased its policy for the first time in three years.

The Turkish lira dropped 0.9% amid Trump's plans to impose sanctions on Turkish government agencies.

The yield on 10-year German Bunds lost 2 basis points to negative 0.458%. The U.S. bond market was closed for Columbus Day.

The Fed said Oct. 11 that it will buy about $60 billion in Treasury bills per month starting in mid-October to boost liquidity and help prevent episodes of money market volatility like the one that occurred in September.

Brent crude oil declined 2.3% to $59.13 per barrel on the ICE Futures Exchange. Gold advanced 0.3%.

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The day ahead:

9:30 p.m. ET — China consumer price index (Econoday consensus: 2.9% year over year)

9:30 p.m. ET — China producer price index (Econoday consensus: -1.2% year over year)