Dollar Falls as U.S. Reform Hopes Dim, Gold Climbs: Markets Wrap

Bloomberg.- The dollar slid back to a 10-month low as President Donald Trump’s economic revitalization agenda once again faltered. European stocks dropped as some earnings disappointed, and gold climbed to the highest in two weeks.

The greenback lost ground against all but one of its G-10 peers on signs Trump’s health-care reform bill is effectively dead in its current form, after two more Republican senators announced their opposition to the plan. Sterling bucked the trend, slipping against the dollar as U.K. inflation unexpectedly slowed in June, while the euro surged ahead of this week’s ECB meeting. The Stoxx Europe 600 Index fell following a grim earnings report from Ericsson AB. Iron-ore futures hit their highest since May on strong demand from Chinese steel mills.

While many traders had already dialed back their expectations Trump will be able to execute his pro-growth policies, the apparent death of the health-care bill lent a risk-off tone to markets. Some notable investors have become less sanguine as global equities continue to trade near record highs.

“Any hopes of dollar support from a successful vote on the Senate’s health-care bill look to be vanishing,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Near term, the dollar path of least resistance is down. We still think the data — inflation in particular — will provide the Fed with enough ammunition to hike in December and boost the dollar, but this is a fourth-quarter story.”

Here are some key upcoming events:

– The European Central Bank meets Thursday. Bloomberg Intelligence expects no change then, and no rate hike before 2019. Reuters cited unidentified officials as saying the bank is keen to keep asset purchases open-ended.
– The Bank of Japan is forecast to stand pat at its meeting Thursday.
– Round two of Brexit talks is underway in Brussels.

Here are the main moves in markets:

Currencies and bonds

– The Bloomberg Dollar Spot Index sank 0.5 percent to its weakest since Sept. 8 as of 8:25 a.m. in New York.
– The euro jumped 0.6 percent to $1.1550 amid the greenback weakness and speculation that the European Central Bank could signal its intent to scale back monetary stimulus at its meeting on Thursday.
– The pound weakened 0.3 percent to $1.3012 after U.K. inflation unexpectedly fell in June.
– 10-year U.S. Treasury yields fell two basis points to 2.29 percent after dropping five basis points last week.

Stocks

– Europe’s Stoxx 600 Index dropped 0.8 percent as miners reversed yesterday’s gains and Ericsson slumped.
– U.S. stock futures slipped 0.1 percent.

Commodities

– Gold climbed 0.4 percent to $1,239.17 an ounce.
– WTI crude jumped 1.7 percent to $46.82, erasing early losses.
– Iron-ore futures surged 4.8 percent, extending yesterday’s 2.4 percent gain.

Asia

– The Topix Index dropped 0.3 percent. It fell as much as 0.9 percent earlier after some officials at the Bank of Japan were reported to be increasingly concerned about the sustainability of its purchases of exchange-traded funds. More on that story here.
– Australia’s S&P/ASX 200 Index slid 1.2 percent. The Shanghai Composite Index and other mainland China markets erased losses and rose.
– The Australian dollar returned to a two-year high after central bank minutes signaled optimism on economic growth and wages.

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