U.S. Futures, Europe Stocks Retreat; Dollar Rises: Markets Wrap

Bloomberg.- U.S. equity futures followed declines across Europe as investors awaited fresh clues on the outlook for global trade and growth. The dollar strengthened and Treasuries were steady.

Contracts on the Nasdaq, Dow Jones and S&P 500 indexes all turned lower as traders returned from the long weekend and before the next round of talks between America and China to try to reach a trade deal. Walmart Inc. was the biggest name reporting earnings, and the retailer’s shares rose in pre-market trading as it announced the best holiday quarter in a decade.

The Stoxx Europe 600 Index retreated after two days of gains, led lower by banks following disappointing earnings from HSBC Holdings and increasingly dovish signals from the region’s central bank. Automakers were also under pressure as the European Union vowed prompt retaliation if the U.S. imposes tariffs on imported vehicles. Italian bonds fell while most European notes climbed.

In Asia, Bank of Japan Governor Haruhiko Kuroda told parliament the central bank would consider extra monetary easing if required, helping lift the Topix index and sending the yen lower. Shares in China were little changed as equities in Hong Kong dropped.

With earnings season nearing its end, the latest minutes from both the Federal Reserve and European Central Bank due this week and U.S. President Donald Trump weighing an extension of the deadline for a trade deal with China, investors have plenty to ponder right now. Uncertainty over the outlook for global growth hangs over everything, and traders will be hoping for some good news from the world’s two largest economies when talks resume in Washington on Tuesday.

“There’s a recession coming,” Steen Jakobsen, the chief economist at Saxo Bank, told Bloomberg Television’s Anna Edwards. He reckons markets are too optimistic on a trade deal between the U.S. and China. “There will by some Pyrrhic victory for the two sides to claim and extend the timeline, but in terms of material impact, no,” he said.

Elsewhere, the pound drifted as U.K. and European officials work on new legal text for the contentious Irish border backstop. The Australian dollar swung to a loss after the nation’s central bank reaffirmed mounting concerns over consumer spending. Gold traded at the highest since April and West Texas crude advanced to trade at about its highest in almost three months.

Here are some key events coming up:

  • The Federal Reserve will on Wednesday publish minutes from its recent meeting, with the European Central Bank following suit on Thursday.
  • Bank of Canada Governor Stephen Poloz speaks on Thursday; ECB President Mario Draghi speaks on Friday, the same day Reserve Bank of Australia Governor Philip Lowe gives parliamentary testimony.
  • An Indonesian rate decision is due Thursday.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index decreased 0.2 percent as of 7:52 a.m. New York time, the largest dip in more than a week.
  • The Stoxx Europe 600 Index dipped 0.5 percent, the biggest decrease in more than a week.
  • The MSCI All-Country World Index decreased 0.2 percent.
  • The MSCI Emerging Market Index declined 0.3 percent.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 percent.
  • The euro sank 0.2 percent to $1.1283.
  • The Japanese yen declined 0.2 percent to 110.79 per dollar.
  • The British pound increased less than 0.05 percent to $1.2928, the strongest in more than a week.
  • The MSCI Emerging Markets Currency Index decreased less than 0.05 percent.

Bonds

  • The yield on 10-year Treasuries dipped less than one basis point to 2.66 percent.
  • Germany’s 10-year yield declined one basis point to 0.10 percent, the lowest in more than a week.
  • Britain’s 10-year yield dipped less than one basis point to 1.161 percent.
  • The spread of Italy’s 10-year bonds over Germany’s rose six basis points to 2.7209 percentage points to the widest in more than a week.

Commodities

  • The Bloomberg Commodity Index increased 0.3 percent to the highest in more than a month.
  • Brent crude declined 0.3 percent to $66.32 a barrel, the first retreat in more than a week.
  • LME copper fell 0.4 percent to $6,247.50 per metric ton, the first retreat in a week.
  • Gold climbed 0.3 percent to $1,330.30 an ounce, the highest in 10 months.

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