Stocks Slide as Treasuries Steady; Crude Retreats: Markets Wrap

• January 29 2018
• Samuel Potter

European equities followed Asian peers lower and U.S. stock futures retreated as caution crept into the market after one of the best starts to a year in recent history. The selloff in Treasuries paused and the dollar weakened, while oil dropped for a second s…

European equities followed Asian peers lower and U.S. stock futures retreated as caution crept into the market after one of the best starts to a year in recent history. The selloff in Treasuries paused and the dollar weakened, while oil dropped for a second session.

The Stoxx Europe 600 Index fell, tracking gauges in Japan, Hong Kong and Australia after the S&P 500 Index declined from a record on Monday. The benchmark Treasury yield rose above 2.7 percent before slipping back, while most European government bonds edged higher as traders digested growth data from the region. The euro advanced alongside the yen and the pound.

A wariness is emerging in equity markets at the end of a hectic month as surging rates on government bonds test appetite for stocks at elevated valuations. Investors are weighing whether stronger corporate earnings, a pick-up in economic growth and optimism over U.S. tax cuts can continue driving up prices in markets that recently touched their highest on record; Goldman Sachs Group Inc. predicts a correction is on the horizon, but says any such pullback would be a buying opportunity.

“An acceleration in the selloff of global bond markets appears to be starting to let some of the air out of the recent rally in global equity markets,” said Michael Hewson, chief market analyst at CMC Markets UK. “U.S. markets suffered their worst one day fall this year, though sharp falls in tech stocks also contributed.” Apple Inc. shares dropped as much as 2.6 percent amid renewed concerns about falling demand for the iPhone X.

Elsewhere, many commodities reversed losses as the dollar weakened. Bitcoin fluctuated around $11,000 and emerging-market stocks slumped.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

• Fed policy makers gather for Chair Janet Yellen’s final meeting on interest rates Wednesday before her term ends.
• President Trump delivers his first State of the Union address.
• Tech giants Microsoft Corp., Facebook Inc., SAP SE, Alibaba Group Holding Ltd., Apple Inc., Alphabet Inc. and Amazon.com Inc. will announce earnings. Large-caps McDonald’s Corp., Exxon Mobil Corp., Merck & Co. Inc., Roche Holding AG, Daimler AG, Deutsche Bank AG and Boeing Co. also report.
• U.S. employers probably added more jobs in January than a month earlier, economists forecast before the Friday report.
• Bank of England Governor Mark Carney will speak before the U.K. Parliament’s Economic Affairs Committee in London Tuesday.
• Gauges of Chinese manufacturing and services industries are due Wednesday.
• On Wednesday, the core euro-zone inflation report may show an uptick from a year ago to 1 percent this month.

And these are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index decreased 0.5 percent as of 7:19 a.m. New York time, the lowest in almost three weeks.
• Futures on the S&P 500 Index fell 0.4 percent to the lowest in a week.
• The MSCI Asia Pacific Index decreased 1 percent on the largest dip in almost eight weeks.
• The U.K.’s FTSE 100 Index dipped 0.6 percent.
• The MSCI Emerging Market Index decreased 1.2 percent on the largest dip in almost eight weeks.

Currencies

• The Bloomberg Dollar Spot Index decreased 0.2 percent.
• The euro jumped 0.3 percent to $1.2426.
• The British pound increased 0.4 percent to $1.4127.
• The Japanese yen increased 0.3 percent to 108.67 per dollar.
• South Africa’s rand gained 0.3 percent to 11.9009 per dollar.
• The MSCI Emerging Markets Currency Index advanced less than 0.05 percent.

Bonds

• The yield on 10-year Treasuries climbed less than one basis point to 2.70 percent, the highest in almost four years.
• Germany’s 10-year yield declined one basis point to 0.69 percent and the largest fall in two weeks.
• Britain’s 10-year yield declined one basis point to 1.447 percent and the biggest fall in two weeks.

Commodities

• West Texas Intermediate crude dipped 1 percent to $64.93 a barrel on the largest decrease in almost seven weeks.
• Gold advanced 0.3 percent to $1,344.15 an ounce.

— With assistance by Adam Haigh