NEW YORK (Jan 12): U.S. stocks fell Friday as energy shares tumbled with oil falling below US$52 a barrel and political turmoil continuing as the government shutdown grows more contentious by the day. Treasuries rose with the dollar, which is on track for its fourth week of declines.
All major equity benchmarks were lower. The S&P 500 slid, trimming its third straight weekly advance to 2%. The post-Christmas rally reached 10% before stalling 2,600, a level it hasn’t topped since mid-December. The Stoxx Europe 600 Index was flat after an earlier gain. In Asia, shares rose in Shanghai, Tokyo, Seoul and Hong Kong amid hopes for a breakthrough on the trade dispute between China and U.S.
The dollar rose as investors appeared to be trimming positions heading into the weekend. It’s been pressured, and bonds have been boosted, by the Federal Reserve’s message of patience on further interest-rate hikes. That case was bolstered by U.S. price data showing inflation slowing in line with expectations. European debt tracked Treasuries higher. The pound advanced even as Prime Minister Theresa May’s office countered reports that Brexit may be delayed.
“Restraint is probably the best approach given markets are choppy, global growth is spluttering and domestic activity is softening,” said James McCann, senior global economist at Aberdeen Standard Investments, which manages US$736 billion. “Today’s data will reinforce expectations that the Fed will wait until at least the middle of the year before hiking again.”
Stocks are still on track for big gains this week amid signs of progress between the world’s two biggest economies on trade and the Fed’s dovish commentary. Nevertheless, worries remain about economic growth and earnings prospects, while there’s also uncertainty as the U.S. partial government shutdown threatens to extend into a fourth week.
Chinese Vice Premier Liu He is set to visit Washington on Jan 30 and Jan 31 for further trade talks. China’s yuan, which slumped last year as trade tensions worsened, is heading for its best week since 2005 — back when the country dropped a fixed peg to the dollar.
These are the main moves in markets:
The S&P 500 Index was down 0.5% at 10:04 a.m. in New York, the first retreat in more than a week. The Stoxx Europe 600 Index was little changed. The MSCI All-Country World Index climbed 0.1%, hitting the highest in more than four weeks with its sixth consecutive advance. The MSCI Emerging Market Index advanced 0.3% to the highest in more than five weeks.
The Bloomberg Dollar Spot Index was up 0.1%. The euro gained 0.3% to US$1.153. The Japanese yen increased 0.1% to 108.31 per dollar. The British pound jumped 0.5% to US$1.2817, the strongest in more than six weeks. The MSCI Emerging Markets Currency Index climbed 0.1% to the highest in almost seven months.
The yield on 10-year Treasuries fell five basis points to 2.6882%, the biggest fall in more than a week. Germany’s 10-year yield decreased one basis point to 0.24%. Britain’s 10-year yield increased one basis point to 1.289%, the highest in more than two weeks. The spread of Italy’s 10-year bonds over Germany’s fell three basis points to 2.6008 percentage points.
The Bloomberg Commodity Index was little changed. West Texas Intermediate crude fell 1.9% to US$51.59 a barrel, the first retreat in more than two weeks. LME copper climbed 0.4% to US$5,953.50 per metric ton. Gold gained 0.1% to US$1,288.34 an ounce.