NEW YORK, June 2 (Reuters) - Wall Street stocks followed their global counterparts lower on Monday as trade tensions between Washington and Beijing heated up and investors showed caution ahead of U.S. employment data and a widely expected policy rate cut from the European Central Bank.
The S&P 500 and the Dow began the month modestly lower, while the tech-heavy Nasdaq showed little movement. The greenback, under pressure amid revived trade strife, weakened as benchmark U.S. Treasury yields ticked higher.
On Sunday, U.S. Treasury Secretary Scott Bessent said President Donald Trump would speak soon with Chinese President Xi Jinping to iron out tensions over a mutually agreed-upon rollback of tariffs on critical minerals after Trump accused Beijing of violating that agreement.
Beijing called Trump's accusation "groundless," and vowed to take forceful measures to protect its interests.
"(Markets are) reacting negatively because the consequences of insecurity are real, right? Investors are unsure of what comes next," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "That makes it difficult to make decisions, and
whilePresident Trump has changed his mind frequently we also know that his ego is such that he's willing to dig his heels in."
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"Things like the TACO acronym (Trump Always Chickens Out) infuriate him and the concern should be, does that mean that he is not going to pivot and back down?" Pursche added.
A report from the Institute for Supply Management showed the U.S. manufacturing sector contracted at a steeper-than-expected pace in May, while construction expenditures defied consensus by falling in April.
The Dow Jones Industrial Average (.DJI), fell 211.67 points, or 0.50%, to 42,058.40, the S&P 500 (.SPX), fell 15.20 points, or 0.26%, to 5,896.49 and the Nasdaq Composite (.IXIC), fell 12.94 points, or 0.07%, to 19,100.83.
European stocks headed lower amid rekindled trade tensions after Trump's announcement late on Friday that he intends to double tariffs on imported steel and aluminum to 50%, starting June 4.
The move drew promises of retaliation from the European Union and sent shares of steel exporters lower.
Geopolitical tensions flared as the Ukraine-Russia conflict intensified over the weekend.
Polish stocks (.WIG20), fell in the wake of nationalist opposition candidate Karol Nawrocki's election victory.
MSCI's gauge of stocks across the globe (.MIWD00000PUS), fell 0.80 points, or 0.09%, to 878.70.
The pan-European STOXX 600 (.STOXX), index fell 0.22%, while Europe's broad FTSEurofirst 300 index (.FTEU3), fell 4.38 points, or 0.20%.
Emerging market stocks (.MSCIEF), fell 3.58 points, or 0.31%, to 1,153.76. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), closed lower by 0.27%, to 607.27, while Japan's Nikkei (.N225), fell 494.43 points, or 1.30%, to 37,470.67.
The dollar lost ground against other major currencies, backing down from the previous week's gains as markets assessed the outlook for Trump's unpredictable trade policy and its potential for dampening growth and fuelling inflation.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.7% to 98.66, with the euro up 0.84% at $1.1442.
Against the Japanese yen , the dollar weakened 0.97% to 142.64.
Longer-dated Treasury yields were mostly higher in the wake of Trump's tariff announcement, but yields slightly pared gains after the manufacturing data.
The yield on benchmark U.S. 10-year notes rose 0.4 basis points to 4.42%, from 4.418% late on Friday.
The 30-year bond yield rose 2.3 basis points to 4.9552% from 4.932% late on Friday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.6 basis points to 3.908%, from 3.914% late on Friday.
Crude oil prices surged after OPEC+ held July output increases at the same level as the previous two months.
U.S. crude rose 3.01% to $62.62 a barrel and Brent climbed to $64.64 per barrel, up 2.98% on the day.
Gold prices touched a one-week high as elevated caution attracted investors to the safe-haven metal.
Aluminum and steel prices surged amid Trump's fresh tariff threat.
Spot gold rose 2.64% to $3,376.24 an ounce. U.S. gold futures rose 2.6% to $3,374.50 an ounce.
Copper rose 1.28% to $9,620.00 a ton. Three-month aluminum on the London Metal Exchange rose 0.82% to $2,464.00 a ton.
Reporting by Stephen Culp, Wayne Cole and Amanda Cooper Editing by Rod Nickel
