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50 subject one dollar note sheets are run through an intaglio printing press before the face is printed at the U.S. Bureau of Engraving and Printing in Washington, D.C., U.S. Photographer: Andrew Harrer/Bloomberg

(bloomberg)

(Bloomberg) -- U.S. stocks dropped and the dollar rallied the most in two weeks as the trade dispute with China showed no signs of easing. Commodities sank.

The S&P 500 Index edged lower for a second day as trade-sensitive stocks paced declines, while a rally in tech shares helped mute the benchmark’s drop. President Donald Trump signaled Thursday he’d press on with the trade war. Low-level delegates from China and the U.S. are wrapping up two days of trade talks as the nations hit each other with new levies on $16 billion of goods.

The dollar rose for the first time in six days, pressuring commodity prices on products from copper to soybeans. The two-year Treasury yield gained ahead of scheduled comments by Federal Reserve chairman Jerome Powell Friday. The Mexican peso dropped against the greenback as investors waited to see if a deal would be reached on Nafta. A tweet by President Donald Trump fueled speculation of possible sanctions against South Africa, pushing the rand lower.

Trade remains in the spotlight after the U.S. and China levied more duties, while Mexico appears close to an agreement on Nafta. And in the background., investors are left to wonder how the political drama in Washington may impact negotiations. All of this could get pushed aside at the end of the week as traders look for hints on the future of monetary policy during a gathering of central bankers in Jackson Hole, Wyoming.

“One of the bigger risks that we keep watching is the trade talks with China. The fact that there’s still discussions going on is good and the fact that both sides are still willing to negotiate is good, but I don’t think that there’s going to be anything monumental that’s going to happen before the midterm elections,” Liz Young, senior investment strategist at BNY Mellon Investment Management, said in an interview at Bloomberg’s New York headquarters. “China is probably going to wait and kick the can down the road until we get there and then see what happens.”

Elsewhere, the British pound fell the most in two weeks after U.K. officials warned that Brexit could raise prices. The Russian ruble swung from a loss to a gain after the central bank said it’s suspending purchases of foreign exchange through the end of September.

Terminal users can read more in our Bloomberg Markets Live blog here.

Here are some key events coming up this week:

  • Central bankers gather at the Kansas City Fed’s annual Jackson Hole symposium, where Powell speaks Friday.

These are the main moves in markets:

Stocks

  • The S&P 500 Index fell 0.2 percent as of 4 p.m. New York time.
  • The Nasdaq Composite Index rose 0.1 percent.
  • The Stoxx Europe 600 Index fell 0.2 percent.
  • Germany’s DAX Index declined 0.2 percent.
  • The MSCI Emerging Market Index fell 0.3 percent.
  • The MSCI Asia Pacific Index fell 0.6 percent, the first retreat in a week.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.7 percent, the biggest rise since June 14.
  • The euro fell 0.5 percent to $1.1541.
  • The British pound dipped 0.7 percent to $1.2816.
  • The Japanese yen decreased 0.7 percent to 111.29 per dollar, the weakest in a week.
  • The South African rand fell 1.9 percent to 14.4289 per dollar.

Bonds

  • The yield on 10-year Treasuries was little changed at 2.82 percent.
  • The yield on two-year Treasuries rose two basis points to 2.61 percent.
  • Germany’s 10-year yield was steady at 0.34 percent.
  • Britain’s 10-year yield was little changed at 1.276 percent.
  • Italy’s 10-year yield gained five basis points to 3.115 percent.

Commodities

  • West Texas Intermediate crude fell 0.1 percent to $67.79 a barrel, the first retreat in more than a week.
  • Gold declined 0.7 percent to $1,187.40 an ounce, the biggest drop in more than a week.

--With assistance from Yakob Peterseil.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter

©2018 Bloomberg L.P.

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