New York: Investors in US equities downplayed an overnight rally in Asian equities and stocks turned lower ahead of a spate of earnings reports this week. The dollar strengthened, while the pound slumped and Italian bonds gave back most of their gains.

After initially opening higher, the S&P 500 and Dow Jones Industrial Average fell, led by declines in energy and material companies. In China, the Shanghai Composite Index surged more than 4%, the biggest increase since March 2016, in the wake of verbal interventions from authorities at the end of last week and plans to cut personal income taxes. Chinese President Xi Jinping vowed “unwavering" support for the country’s private sector.

“It’s early days with under 15% of companies having reported [earnings], but the beats have been above average, and margin strength has continued despite some concerns about higher input costs," said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “That said, corporate earnings calls have highlighted several potential and real headwinds as we face 2019."

Italy’s sovereign bonds pared their advance after the nation’s populist government called for a budget dialogue with the European Union to address their differences. The pound retreated as the UK blurred more red lines in its Brexit negotiations, heightening the danger to Prime Minister Theresa May.

Risks still abound across global markets, from the continuing US-China trade showdown and tension surrounding the killing of a Saudi journalist to Italian budget fears and President Donald Trump’s unpredictable actions ahead of American midterm elections. Still, equities are attempting to bounce back after a miserable few weeks, and company results from the likes of Amazon, Alphabet, Microsoft and Intel as well as US growth data may provide a welcome stimulus in the coming days.

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