© Reuters. Traders work on the floor at the NYSE in New York
By Shreyashi Sanyal
(Reuters) – Wall Street’s main indexes dipped on Wednesday over worries of a prolonged U.S.-China trade war after Washington toughened its stance, but losses were cushioned by a muted reading on inflation that backed the case for an interest rate cut.
A report from the Labor Department showed U.S. consumer prices rose 0.1% in May, in line with expectations of economists polled by Reuters, pointing to moderate inflation.
“These numbers will add some fuel to the case made by the markets and many analysts that the Fed should cut rates,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.
Fresh worries erupted on the trade front after President Donald Trump said he was holding up a deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points.
With under three weeks to go before proposed talks between the United States and Chinese leaders, sources say there has been little preparation for a meeting even as the health of the world economy is at stake.
Trump also said a potential trade deal could be reached with China, but again threatened to increase tariffs on Chinese goods if they do not make a deal.
“The trade fears have come back and will continue to make investors nervous at least until the G20 summit. The fact remains that the two countries are not very close to making a deal,” said Rick Meckler, partner, Cherry Lane Investments, New Vernon, New Jersey.
Hopes that the Federal Reserve will act to counter a slowing global economy due to escalating trade war have spurred a rally in stocks this month, with the rising 4.7% so far in June.