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Oil, shares fall on potential limit on China investments

Published 2019-09-27, 12:26 p/m
© Reuters.  Oil, shares fall on potential limit on China investments

* MSCI's world equity index flat after erasing losses

* Trump impeachment talk adds to geopolitical risk

* U.S.-China trade optimism boosts Europe

* But investors see major deal in October unlikely

* Dollar flat, euro at more than 2-year lows

* Wall Street futures up 0.3%

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Herbert Lash

NEW YORK, Sept 27 (Reuters) - Crude oil prices and a gauge of global equity markets fell on Friday after a report said the administration of U.S. President Donald Trump was weighing limits on the flow of U.S. portfolio investments into China.

White House officials are discussing ways to limit U.S. portfolio flows into China, Bloomberg reported, citing people familiar with the internal deliberations. officials are also considering delisting Chinese companies from U.S. stock exchanges, a Bloomberg reporter said separately in a tweet.

A gauge of world equity markets had rebounded earlier, buoyed by optimism U.S.-China trade tensions might be easing as markets largely brushed off concerns about impeachment moves against Trump.

MSCI's world equity index .MIWD00000PUS , which tracks shares in 47 countries, fell 0.2%, heading toward its worst weekly performance since mid-August.

Major equity indexes in Europe closed higher even as data showed slowing growth around the world. data showed consumer spending barely rose in August and business investment remained weak, suggesting the American economy was losing momentum as trade tensions linger. the Commerce Department reports likely do not signal a recession is looming as consumer spending remains supported by solid income growth thanks to the lowest unemployment rate in nearly 50 years and massive savings.

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"The market is in a holding pattern for a bunch of different reasons; one is the data has gotten better but it's still very much mixed," said Joseph LaVorgna, chief economist for the Americas at Natixis in New York.

"There's no catalyst to push equities meaningfully higher or lower, so we're going to wait and see what the next surprise is. Either it's data or something on the political front," he said.

A strong rally in mining shares propped up European shares, but they ended the week lower for the first time in five weeks as concerns about economic growth and trade, as well as political worries, kept a lid on gains. pan-European STOXX 600 index .STOXX closed up 0.47% and the FTSEurofirst 300 index .FTEU3 of leading regional shares gained 0.41%.

On Wall Street, the Dow Jones Industrial Average .DJI rose 6.82 points, or 0.03%, to 26,897.94. The S&P 500 .SPX lost 5.68 points, or 0.19%, to 2,971.94 and the Nasdaq Composite .IXIC dropped 37.25 points, or 0.46%, to 7,993.42.

Earlier in the day, Asia-Pacific shares outside Japan .MIAPJ0000PUS were buffeted by the political worries in the United States and shed 0.3%.

Oil prices headed for a weekly loss on a faster-than-expected recovery in Saudi output, while investors also worried about global crude demand amid slowing Chinese economic growth.

In a volatile session, Brent crude LCOc1 futures lost 79 cents to $61.95 a barrel.

U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 28 cents to $56.13 a barrel.

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In China, the world's second-largest economy and biggest importer of crude oil, industrial companies reported a contraction in profits in August. the global economy weakens, for which there are already some signs, we may lower oil demand expectations," IEA Executive Director Fatih Birol told Reuters.

Bond yields in France and Spain were set for their biggest weekly decline in six weeks, while a key market gauge of long-term inflation expectations slid back toward record lows in a sign of growing concern about weak growth and inflation.

A key market gauge of the euro zone's inflation expectations fell to its lowest level since early July at 1.188% EUIL5YF5Y=R , heading back toward record lows hit in June.

French and Spanish 10-year bond yields were down 6-9 basis points this week, their biggest weekly decline in six weeks ES10YT=RR FR10YT=RR .

U.S. Treasury prices traded little changed after U.S. data was weaker than expected and as month- and quarter-end rebalancing increased demand for safe-haven U.S. debt.

Benchmark 10-year notes US10YT=RR fell 2/32 in price to yield 1.6913%.

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