Global stocks fall, bonds rise as risk rally flags

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LONDON (Jan 22): U.S. stocks opened lower Tuesday in the wake of a slide in European and Asian shares as a cloudy outlook for trade and growth continued to weigh on risk appetite. Treasuries climbed and the yen strengthened.

The S&P 500, Dow and Nasdaq all were weaker a day after American markets were shut for a holiday. EBay Inc. bucked the trend, surging in early trading after Elliott Management Corp. sent a letter to its board outlining steps it says are “urgently needed” to boost its value. The Stoxx Europe 600 Index dipped after Switzerland’s UBS Group AG delivered disappointing results. European bonds followed Treasuries higher and the dollar edged up for a sixth day.

Earlier, shares retreated across Asia after Chinese President Xi Jinping stressed the need to maintain political stability, comments which hinted at growing concern over the country’s slowing economy. News that the U.S. is seeking extradition of a top Huawei executive added to tensions.

After stocks and many risk assets kicked off the year with a stellar rally, investors now find their conviction tested anew as a familiar litany of concerns weigh on sentiment. The IMF’s dour forecast for global growth, fears of slowing momentum in the world’s second-largest economy and uncertainty over trade are all combining to spook markets.

“The appetite for risk is exceptionally low,” Ajay Kapur, head of Asia-Pacific and global emerging market strategy at Bank of America Merrill Lynch, told Bloomberg Television. “Most of the time, when you buy when sentiment is this depressed, you tend to make money,” unless there’s a recession, he said. “If you’re confident there will be no recession in the next year or so, I think this is a good indicator.”

Elsewhere, the pound rose after U.K. data showed the jobs market remains resilient and as Labour leader Jeremy Corbyn backed a plan that could open the door to a second Brexit referendum. Oil retreated from a near two-month high in New York.

These are some events investors will be watching out for in the coming days:

Earnings season is in full swing: IBM, United Technologies, Texas Instruments, and Ford are among companies posting results this week. The World Economic Forum, the annual gathering of global leaders in politics, business and culture, opens in Davos, Switzerland on Tuesday. There are monetary-policy decisions for the Bank of Japan (Wednesday), the Bank of Korea and the European Central Bank (both Thursday).

And these are the main moves in markets:

Stocks

The S&P 500 Index fell 0.6% as of 9:31 a.m. New York time, while Nasdaq Composite Index dropped 0.7% and the Dow Jones Industrial Average declined 0.6%. The Stoxx Europe 600 Index declined 0.5%, the largest drop in more than a week. 

The U.K.’s FTSE 100 Index dipped 0.9%. Germany’s DAX Index declined 0.6%. The MSCI Emerging Market Index declined 0.5%, the largest drop in more than a week.

Currencies

The Bloomberg Dollar Spot Index rose 0.1%, hitting the highest in almost three weeks with its sixth straight advance. The euro decreased 0.2% to US$1.1343, the weakest in almost three weeks. The British pound increased 0.2% to US$1.2914. The Japanese yen gained 0.2% to 109.44 per dollar, the biggest rise in more than a week.

Bonds

The yield on 10-year Treasuries sank four basis points to 2.75%, the largest decline in more than a week. Germany’s 10-year yield fell two basis points to 0.24%, the biggest fall in a week. Britain’s 10-year yield fell less than one basis point to 1.322%.

Commodities

West Texas Intermediate crude declined 1.1% to US$52.69 a barrel, the largest drop in more than a week. Gold rose 0.6% to US$1,283 an ounce.