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Bonds rally as global trade tensions simmer; gold shines as stocks lose luster

➤ China plans blacklist of foreign firms, probes FedEx over Huawei parcels.

➤ U.S. ends special trade status for India, mulled tariffs on Aussie goods.

➤ Stocks fall amid global trade woes; Infineon leads losses in Europe.

➤ Bonds continue rally with 10-year Treasury yields at 2.10%.

Wall Street is set to track losses in Asia and Europe, while oil prices declined and safe-haven assets such as bonds and gold climbed as signs of easing trade tensions remained out of reach.

In a white paper published June 2, China placed the blame on the U.S. for the lack of progress in trade talks between the world's two largest economies, saying that while it hopes to resolve the dispute through dialogue, it will not bow down to pressure. China also maintained demand for the U.S. to remove the additional tariffs on Chinese goods before a deal could be reached.

The paper was released after China announced a plan to create a blacklist of foreign entities it believes threaten domestic companies. The country also announced a probe into FedEx Corp. following a complaint by Huawei Technologies Co. Ltd. against the logistics service provider for allegedly diverting two China-bound parcels sent from Japan to the U.S.

Asset markets are expected to "react quite negatively" to China's moves over the weekend, said Iris Pang, ING Greater China economist, in a note. "But these actions could be viewed as putting China back onto a level playing field. The U.S. should now know that suppressing China will result in bounce-back retaliation from China," Pang added.

Meanwhile, Mexico's Economy Secretary Graciela Márquez will meet U.S. Commerce Secretary Wilbur Ross in Washington today before a planned U.S. tariff on all Mexican goods kicks in on June 10. Adding to global trade tensions, the U.S. canceled India's preferential access to the U.S. market, effective June 5, while The New York Times reported that the U.S. government had considered imposing tariffs on Australian goods in response to rising aluminum imports from the country, before ultimately deciding against such a move.

Wall Street looked set to extend losses this morning as futures for the S&P 500 and Nasdaq 100 declined 0.3% and 0.5%, respectively, following declines in Asian and European stocks.

In European equities, the FTSE 100 index slipped 0.3% and France's CAC 40 dropped 0.1%. Germany's index lost 0.1% and the wider Stoxx Europe 600 dipped 0.2%, led by a 7% decline in Infineon Technologies AG as the German semiconductor maker agreed to acquire U.S. chipmaker Cypress Semiconductor Corp. for an enterprise value of €9.0 billion.

In Asia, the Shanghai SE Composite Index lost 0.3%, while Hong Kong's Hang Seng was little changed. Japan's Nikkei 225 index shed 0.9% as private data showed manufacturing activity contracting in May due to weak demand from China, while Australia's S&P/ASX 200 index fell 1.2%.

Yields on 10-year Treasurys shed 3 basis points to 2.10%, while those on German Bunds with the same maturity dropped 1 basis point to negative 0.21%. Ten-year Italian bond yields declined 6 basis points to 2.60% amid reports that Prime Minister Giuseppe Conte threatened to quit over tensions between the two parties that make up the government.

In currencies, the dollar index ticked down to 97.7 as the euro inched up against the U.S. currency to near $1.118, while sterling added 0.1%. U.S. President Donald Trump is in the U.K. today for a three-day state visit, with Huawei's role in the country's 5G infrastructure expected to be on the agenda.

Elsewhere, the Japanese yen barely moved against the dollar, while the Swiss franc rose more than 0.1%. The Australian dollar rose 0.3% against its U.S. counterpart ahead of a Reserve Bank of Australia monetary policy decision this week, with analysts expecting a rate cut.

Brent crude oil lost 0.6% to $62.38 per barrel on the ICE Futures Exchange. Gold rose 0.8% to $1,322.10 per ounce.

More from S&P Global Market Intelligence:

Who is vying for the EU's top jobs

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Construction loans rebound, delinquencies rise at US banks in Q1'19

Trade spats cause economists to shift Fed calls, with some seeing rate cuts

The day ahead:

9:45 a.m. ET — U.S. purchasing managers' manufacturing index (Econoday consensus: 50.6)

10 a.m. ET — U.S. Institute For Supply Management manufacturing index (Econoday consensus: 52.9)

10 a.m. ET — U.S. construction spending (Econoday consensus: 0.5% month over month)

1:25 p.m. ET — U.S. Fed's James Bullard speaks

9:45 p.m. ET — U.S. Fed's Mary Daly speaks