U.S. Stocks Rebound, Dollar Stumbles With Yields: Markets Wrap

• February 21 2018
• Jeremy Herron, Kailey Leinz

U.S. stocks rose for the first time in three days even as most global gauges slumped in the wake of Federal Reserve minutes that seemed to boost the prospect of tighter monetary policy. The dollar fell as Treasuries rose.

U.S. stocks rose for the first time in three days even as most global gauges slumped in the wake of Federal Reserve minutes that seemed to boost the prospect of tighter monetary policy. The dollar fell as Treasuries rose.

The moves in U.S. assets reversed late-day action that saw the S&P 500 Index fall about 1 percent from its session high and the dollar power to a fourth straight gain following the minutes from the Fed’s January meeting. Investors are now assessing whether recent signs of economic growth accompanied by a pickup in inflation will force the Fed to accelerate the pace of rate increases.

“The market is pricing in the possibility of a tighter Fed over time,” Evan Brown, director at UBS Asset Management, who previously worked on the open market trading desk at the New York Fed, told Bloomberg TV in New York. On a day-to-day basis “you’re going to see volatility, you’re going to see equities get a little skittish when yields are rising, but as you look over the long term, fundamentals on the economy are very strong,” he said.

In Europe the Stoxx 600 Index slid as almost all the major national equity gauges in the region fell. It was a similar picture across Asia, though China’s market bucked the trend as it reopened after a holiday.

For now, markets remain fragile. February is shaping up as one of the worst months for global equities in more than a year as concerns about a pick-up in inflation and expensive stock prices outweigh evidence of a buoyant U.S. economy. With recent data underpinning the view that inflation is no longer lagging, the OIS space shows traders pricing in just shy of three U.S. rate hikes over the next 12 months.

Elsewhere, gold erased a drop to trade little changed as most commodities retreated. The pound was weaker as data showed the U.K. economy expanded less than previously estimated in the fourth quarter, and the euro edged up as minutes from the European Central Bank showed officials continue to lay the ground for a shift in policy language in the first half of the year.

Terminal users can read more in our markets blog.

Here are some key events scheduled for this week:

• U.K. PM Theresa May is locking down her ministers in a bid to agree what kind of post-Brexit trade deal they want from the EU.
• Fed policy makers still due to speak include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic.
• Companies announcing earnings include Woolworths and Royal Bank of Scotland.

These are the main moves in markets:

Stocks

• The S&P 500 rose 0.9 percent at 11:39 a.m. in New York, halting a two-day slide that topped 1 percent.
• The Nasdaq 100 Index rose 0.8 percent.
• The Stoxx Europe 600 Index decreased 0.2 percent.
• The MSCI Asia Pacific Index dipped 0.6 percent to the lowest in a week.
• The MSCI Emerging Market Index sank 0.7 percent, the largest decrease in almost two weeks.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.4 percent, the first retreat in a week.
• The euro gained 0.2 percent to $1.2306, the largest advance in a week.
• The British pound fell 0.1 percent to $1.391, reaching the weakest in more than a week on its fifth consecutive decline.
• The Japanese yen jumped 0.9 percent to 106.87 per dollar, the first advance in a week and the largest climb in more than two weeks.
• South Africa’s rand decreased 0.1 percent to 11.6711 per dollar.
• The MSCI Emerging Markets Currency Index sank 0.3 percent to the lowest in more than a week.

Bonds

• The yield on 10-year Treasuries sank four basis points to 2.91 percent, the biggest tumble in more than two weeks.
• Germany’s 10-year yield decreased one basis point to 0.71 percent.
• Britain’s 10-year yield rose less than one basis point to 1.555 percent.

Commodities

• West Texas Intermediate crude decreased less than 0.05 percent to $61.66 a barrel.
• Gold climbed 0.2 percent to $1,326.79 an ounce, the first advance in a week.

— With assistance by Betty Liu, Adam Haigh, Andreea Papuc, and Samuel Potter