US open: Stocks turn south after early gains

Wall Street trading got off to a mixed start on Monday with US-China trade developments back in the stoplight.

As of 1535 BST, the Dow Jones Industrial Average was down 0.29% to 25,369.38 and the S&P 500 was trading 0.35% lower at 2,758.19, while the Nasdaq was up 0.02% to 7,450.59.

US stocks rose modestly at the bell as global equities took a cue from Chinese markets. However, they quickly headed south again with US-China trade developments back in the stoplight following reports that White House economic advisor Larry Kudlow had accused Beijing of doing nothing to ease trade disputes ahead of a G-20 meeting in Argentina next month.

"This development has not only reduced optimism over the United States and China finding a middle ground on trade but raised prospects of the US next year boosting the tariffs on $200bn of Chinese imports from 10% to 25%," said Lukman Otunuga, research analyst at FXTM.

"With a full-blown trade war between the world’s two largest economies presenting a significant threat to global growth and stability, sentiment is poised to remain fragile."

Otunuga said the main focus in the US this week would be the first reading of third-quarter GDP out on Friday.

"US economic growth is expected to have expanded 3.3% during the third quarter of 2018, slower than the 4.2% achieved in Q2. An upside surprise on GDP growth has the potential to boost buying sentiment towards the Dollar and reinforce market expectations of higher US interest rates."

Elsewhere, Italy was in focus after Moody's downgraded the country's credit rating on Friday to Baa3, leaving it just one notch above "junk" but revised the outlook from "negative" to "stable".

After the EU rejected Italy's budget plan to lift the deficit to 2.4% of domestic output next year from 1.8% in 2018, the government responded on Monday by saying it will adjust its fiscal policies if it risks falling short of its deficit commitments.

Italian stocks were higher on Monday, but bonds were sold off, boosting their yields.

In corporate news, Halliburton shares lost 2.26% after the energy services company posted better-than-expected third-quarter profits and revenue.

Toy-maker Hasbro on the other hand dropped 5.37% after its third-quarter profit and revenue fell short of analysts' expectations.

Personal care company Kimberly-Clark slipped 1.19% despite profits topping estimates on the Street. The group also revealed that CEO Thomas Falk would step down next year.

On the data front, the Chicago Fed National Activity Index slid to 0.17 in September from the upwardly revised 0.27 recorded back in August, while the three-month moving average fell to 0.21 from an upwardly revised 0.27, according to the Federal Reserve Bank of Chicago.

The Chicago Fed National Activity Index, which is designed to gauge overall economic activity and related inflationary pressure is based on a weighted average of 85 existing monthly indicators of national economic activity, was originally reported as 0.18 in August, while the three-month moving average came in at 0.24 the first time around.

Over the weekend, two top US central bank officials signalled a need for two or three more interest rate hikes over the current tightening cycle.

Speaking on Saturday, Atlanta Fed President, Raphael Bostic, said: "there's still a couple more moves that are left."

In remarks made during a community conversation, Bostic said the US economy had continued to grow and to perform in a very positive way, with the steady expansion supported in part by the gradual tightening seen in monetary policy.

Two days earlier, Dallas Fed chief, Robert Kaplan, said the US central bank would need to raise short-term interest rates twice and "more likely" three times to reach neutral.