Global Stocks Extend Selloff; Treasury Yields Rise: Markets Wrap

• February 08 2018
• Robert Brand

European stocks declined following a turbulent session in Asia that left a sea of red hours after U.S. equities on Thursday entered into a correction. Treasury yields rose and the dollar edged lower.

European stocks declined following a turbulent session in Asia that left a sea of red hours after U.S. equities on Thursday entered into a correction. Treasury yields rose and the dollar edged lower.

The Stoxx Europe 600 Index is set for its worst week since 2016 as banks and financial-services stocks led most industry sectors lower. But U.S. equity futures gained as Congress passed a delayed budget deal, suggesting a measure of calm may return to markets after a selloff that wiped about $5 trillion from global stocks since January. Core European bonds steadied. China’s benchmark fell the most in almost two years earlier, while the MSCI World Index is set for its biggest weekly drop since 2011.

Equity traders have yet to get comfortable with a jump up in benchmark U.S. 10-year yields to the highest in four years, and worries over unwinding bets against volatility in stocks continue to cast a shadow over markets. The negative superlatives have piled up quickly: the S&P 500 has erased its gain for the year, closed at a two-month low and is on track for its worst week since 2011. The Dow plunged more than 1,000 points for the second time in four days.

Pressure on stocks again came from the Treasury market, where another weak auction Thursday gave bond bears ammunition, sending the 10-year note yield as high as 2.88 percent. Equity investors took the signal to mean interest rates will push higher as inflation gathers pace, denting earnings and consumer-spending power.

“A reassessment of the inflation outlook at this point in the cycle is natural and markets are adjusting for this,” Kerry Craig, a Melbourne-based global market strategist at JPMorgan Asset management, said in a note. “But given that U.S. markets are now in correction territory it’s likely that the most severe gyrations will hopefully have passed. Volatility may remain for a while longer, but the strong economic backdrop and sustained earnings outlook means we continue to prefer equities.”

Elsewhere, oil headed toward its worst week in almost a year as the global risk-asset rout further rankled investors already concerned over growing U.S. supply. Gold declined along with most industrial metals. South Africa’s rand strengthened as speculation intensifies that President Jacob Zuma will soon resign. Russia’s ruble was among the best-performing emerging-market currencies after the country’s central bank cut its policy rate.

Terminal users can read more in our markets blog.

These are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index dipped 0.5 percent as of 11:04 a.m. London time, the lowest in more than five months.
• The U.K.’s FTSE 100 Index fell 0.3 percent.
• Germany’s DAX Index decreased 0.4 percent to the lowest in about five months.
• Futures on the S&P 500 Index gained 0.7 percent.
• The MSCI Asia Pacific Index fell 1.8 percent.
• Topix index fell 1.9 percent.
• Hong Kong’s Hang Seng Index tumbled 3.1 percent.
• Kospi index fell 1.8 percent.

Currencies

• The Bloomberg Dollar Spot Index declined 0.1 percent.
• The euro gained 0.1 percent to $1.2259.
• The British pound dipped 0.1 percent to $1.3895.
• The Japanese yen declined 0.4 percent to 109.13 per dollar.
• South Africa’s rand jumped 0.6 percent to 12.0929 per dollar.

Bonds

• The yield on 10-year Treasuries gained three basis points to 2.85 percent, the highest in about four years.
• Germany’s 10-year yield fell less than one basis point to 0.76 percent.
• Britain’s 10-year yield dipped two basis points to 1.617 percent.

Commodities

• West Texas Intermediate crude dipped 0.7 percent to $60.70 a barrel, reaching the lowest in more than five weeks.
• Gold fell 0.2 percent to $1,316.38 an ounce, the lowest in a month.
• Copper decreased 0.5 percent to $3.07 a pound, the lowest in almost two months.

Terminal users can read more on this week’s market turmoil in these Bloomberg stories:

• Map to the Underworld: $2 Trillion of Volatility Trades Here
• How Does the World End? Stock Markets After a Psychological Peak
• Good Is Bad, Bad Is Good and Trump Is Miffed at Stock Traders
• End of a Bull Market, or Nowhere Near? Making the Case for Both
• Credit Suisse Fund Liquidated, ETFs Halted as Short-Vol Bets Die

— With assistance by Cormac Mullen