Stocks Drop on Earnings, India; Pound Strengthens: Markets Wrap

Bloomberg.- U.S. equity futures fell and stocks dropped in Europe as headwinds emerged from disappointing corporate earnings to geopolitical tension in Asia. The dollar and Treasuries were steady as traders await the second half of Federal Reserve Chairman Jerome Powell’s testimony to Congress.

The Stoxx Europe 600 index declined as Air France-KLM dropped the most ever and Nivea hand-cream maker Beiersdorf cut guidance, sparking a downdraft in travel and consumer stocks including giant Unilever. Earlier, S&P futures slipped, Japan equities came off their highs and Hong Kong shares erased an advance after Pakistan said it downed two Indian jets. While news of the worst escalation between the two nations since the 1971 war moved the yen higher and India’s rupee lower, volatility across currencies continued on its downward trend.

The pound headed for its highest close since last June, spurred by a promise from U.K. Prime Minister Theresa May for a vote to delay Brexit if her proposed deal fails. Brent oil futures climbed above $66 a barrel.

Investors have added the India-Pakistan flare-up to a host of uncertainties they’re tracking, from China trade talks to Brexit, that could rein in a recovery in global equities from December lows. U.S. President Donald Trump is in Hanoi for a second summit with North Korean leader Kim Jong Un, with the outcome uncertain. Powell’s testimony on Tuesday helped steady the ship, though, as he gave no indication that the Fed is ready to alter policy any time soon.

India’s rupee reversed gains and Pakistan’s benchmark stock index plunged more than 3 percent in Karachi before recovering after the latest escalation in tensions. The Pakistani action came a day after India’s Air Force jets bombed what it said was a terrorist training camp inside Pakistan.

Trading in equity and bond futures were earlier impacted by a technical problem at CME Group Inc. The advance in oil futures is reversing some of its loss from earlier in the week that was spurred by criticism from Trump that prices are too high.

Here are some key events coming up:

  • Powell delivers the second half of his semiannual testimony on monetary policy and the state of the economy to a House committee Wednesday.
  • Thursday brings fourth quarter U.S. GDP.

These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index declined 0.3 percent as of 7:52 a.m. New York time, the largest drop in almost two weeks.
  • Futures on the S&P 500 Index fell 0.2 percent.
  • The MSCI Asia Pacific Index rose less than 0.05 percent.
  • The MSCI Emerging Market Index fell 0.2 percent.
  • India NSE Volatility Index rose 10.4 percent.

Commodities

  • The Bloomberg Dollar Spot Index fell less than 0.05 percent.
  • The euro fell less than 0.05 percent.
  • The British pound jumped 0.6 percent to $1.3328, the strongest in more than eight months.
  • The Japanese yen increased 0.1 percent to 110.53 per dollar, the strongest in more than a week.
  • The Indian rupee fell 0.2 percent.

Bonds

  • The yield on 10-year Treasuries fell less than one basis point to 2.63 percent, the lowest in almost four weeks.
  • Germany’s 10-year yield fell one basis point to 0.11 percent.
  • Britain’s 10-year yield climbed one basis point to 1.212 percent, the highest in three weeks.

Commodities

  • The Bloomberg Commodity Index rose 0.3 percent to 81.46.
  • LME nickel fell 0.3 percent to $12,920 per metric ton.
  • Brent crude rose 1.4 percent to $66.11 a barrel, the biggest advance in more than a week.

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