Stocks climb, dollar dips with US-China trade talks eyed

By Chuck Mikolajczak

NEW YORK (Reuters) -Global stocks climbed on Monday while the dollar retreated as talks began in London between the United States and China, aimed at cooling a trade dispute between the world's two largest economies.

The dispute has expanded beyond tit-for-tat tariffs to restrictions over rare earths, threatening to cripple supply chains and slow global growth.

U.S. President Donald Trump said his administration was doing well and that he was getting good reports as U.S. officials hold the talks with China in London.

“The market deems any dialogue with Beijing as progress, whether or not it leads to tangible results. The market is just going to take the administration's word for it, until proven otherwise,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.

On Wall Street, the S&P and Nasdaq closed higher, with the Dow ending flat as declines in Travelers and McDonald's, the latter of which was downgraded by Morgan Stanley to an "equal-weight" rating, curbed gains. 

The Dow Jones Industrial Average fell 1.11 points, or flat, to 42,761.76, the S&P 500 rose 5.52 points, or 0.09%, to 6,005.88 and the Nasdaq Composite rose 61.28 points, or 0.31%, to 19,591.24. 

Small-cap stocks outperformed, with the S&P 600 index up 0.9%.

MSCI's gauge of stocks across the globe advanced 1.94 points, or 0.22%, to 893.90 and was on track for its second straight session of gains. It has risen in five of the last six sessions.

In Europe, the pan-European STOXX 600 index closed down 0.07% to snap a four-session winning streak, its longest run of consecutive gains in three weeks.

The U.S. dollar slipped against most major currencies, as optimism over a better-than-expected U.S. employment report on Friday was offset by caution ahead of the trade talks.

U.S. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are representing Washington in the talks in London, Trump said in a social media post.

China's foreign ministry said Vice Premier He Lifeng was in Britain for the first meeting of the China-U.S. economic and trade consultation mechanism.

U.S. economic data showed wholesale inventories increased in April amid stockpiling of prescription medication in anticipation of tariffs from the Trump administration.

Investors are also awaiting U.S. inflation data on Wednesday that may adjust expectations for the timing of any rate cuts by the Federal Reserve.

Analysts at Morgan Stanley said they see May as the starting point for a string of increasingly strong core inflation prints, with the push from tariffs peaking in the third quarter and beginning to fade in the fourth quarter. 

The market does not see the Fed likely to cut before its September meeting, currently pricing in a 62% chance for a cut of at least 25 basis points, according to LSEG data. Fed officials are in a blackout period ahead of the June 18 policy decision.

The dollar index, which measures the greenback against a basket of currencies, lost 0.14% to 98.97, with the euro up 0.25% at $1.1423.

Longer-dated U.S. Treasury yields were lower at the start of the week, reversing after Friday's jobs report pushed yields higher. The yield on benchmark U.S. 10-year notes declined 2.8 basis points to 4.482%.

Investors will monitor auctions of three-, 10- and 30-year U.S. notes and bonds this week for signs of investor demand.

U.S. crude settled up 1.1% to $65.29 a barrel and Brent settled at $67.04 per barrel, up 0.86% on the day on hopes a trade deal could spur the global economic outlook along with a softer dollar.

(Reporting by Chuck Mikolajczak in New York; Additional reporting by Nell Mackenzie in London, Rocky Swift in Tokyo, and Kanchana Chakravarty and Sukriti Gupta in Bengaluru, and by Noel Randewich in Oakland, California; Editing by Susan Fenton, Nia Williams and Matthew Lewis)