Stocks sell off as gold rises before Trump speech: Markets wrap

Bloomberg.- European equities retreated, erasing all gains for the week before a major speech from U.S. President Donald Trump. Gold extended its rally as the dollar edged lower.

Bullion rose for a fourth week after U.S. Treasury Secretary Steven Mnuchin said Thursday he expects low borrowing costs to persist, sparking a drop in the dollar. A gauge of the U.S. currency headed for a weekly decline. European shares slid the most this month as both BASF SE and Vivendi SA gave downbeat outlooks for 2017. Oil pared a weekly advance, while silver headed for the longest run of weekly gains since 2006.

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The rally in global equities that helped push their value above $70 trillion is losing momentum as money managers grapple with political uncertainty and the Federal Reserve’s schedule for lifting borrowing costs. Traders are taking a wary stance heading into the weekend, before Trump’s address to House and Senate lawmakers Tuesday in the U.S.

“Next week it will be three weeks since President Trump promised something ‘phenomenal’ with respect to tax reform and investors are starting to become a little restless,” Michael Hewson, the London-based chief market analyst at CMC Markets, said in a report. If Trump’s speech next week fails to provide details “the rally that we’ve seen in the past three months could become susceptible to some profit-taking,” he said.

What traders are watching for:

– Investors will be looking for details on tax cuts or other economic plans when Trump addresses Congress next week.
– Billionaire Warren Buffett releases his annual letter to shareholders with Berkshire Hathaway Inc.’s earnings over the weekend.
– Legislators in the U.K. will consider changes to the Brexit bill next Monday and Wednesday that may address the rights of EU citizens in Britain and give parliament a binding vote on the final deal.

Here are the main moves in markets:

Stocks

– The Stoxx Europe 600 Index fell 1 percent as of 7:11 a.m. in New York, heading for the biggest one-day decline since Jan. 30.
– Japan’s Topix index lost 0.4 percent. The gauge rose 0.4 percent for the week.
– Futures on the S&P 500 fell 0.4 percent.
– Vivendi slumped 3.6 percent after forecasting 2017 earnings below analysts’ estimates, while BASF dropped 3.3 percent. Standard Chartered Plc fell 2.9 percent after posting annual profit that missed analyst estimates.

Commodities

– West Texas Intermediate traded 0.7 percent lower at $54.06 a barrel. Brent fell 0.8 percent to $56.11.
– Copper rose 0.5 percent to $5,890 a metric ton, rebounding from the biggest daily drop in 17 months as traders turned bullish amid supply disruptions at big mines. Nickel added 1.1 percent.
– Gold climbed 0.6 percent to $1,256.85 an ounce, heading for a fourth weekly gain.
– Silver rose 0.6 percent, headed for a ninth weekly increase — the longest run of gains since 2006. The metal’s giving the best return this year among the 22 raw materials in the Bloomberg Commodity Index as political risk in the U.S. and Europe has boosted investor demand for a haven.

Currencies

– The Bloomberg Dollar Spot Index dropped 0.1 percent after falling 0.3 percent in the previous session.
– The euro strengthened 0.2 percent to $1.0605.
– The yen added 0.2 percent to 112.34 per dollar, after rising 0.6 percent Thursday.

Bonds

– European debt gained, with the ECB’s bond-buying program seen supporting the sector. German 10-year yields fell two basis points to 0.21 percent, while French benchmark yields shed three basis points to 0.96 percent. Gilts yielded 1.12 percent.
– The swap spread — the difference between German bonds and the equivalent interest rate swap — rose to new records across the two- to five-year sector.
– A note from Citigroup suggested that German two-year yields could fall to minus 1 percent or more, as the ECB will be forced to buy more short-dated bonds.

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