The U.S. dollar strengthened on Thursday, once again hitting the highest in almost a year, as investors continued to fret about the outlook for global trade. European equities gained alongside U.S. futures, while emerging-market stocks slid.
The greenback advanced against almost every major peer following an increase in Treasury yields on Wednesday, though U.S. notes steadied and European bonds drifted. Shares in Asia declined as benchmarks in Malaysia, the Philippines and Thailand all fell at least 1 per cent. Indonesia’s rupiah dropped more than 1 per cent to pace declines in emerging-market currencies, while the pound weakened before a rate decision. West Texas oil slipped below $66 a barrel ahead of a crucial OPEC meeting that will decide on output.
“At the moment we just want to be a little bit cautious,” Colin Graham, chief investment officer of multi-asset solutions at Eastspring Investments, said on Bloomberg Television. “Overall Goldilocks is still alive and it’s going to be fine this year -- risk assets are still going to outperform safe-haven assets -- but we are going to see more choppy returns.”
The global markets agenda continues to be dominated by trade threats and fears, which elicited warnings from major central bankers on Wednesday and are beginning to show up in the business cycle -- Daimler AG cut its profit outlook in part due to escalating tension between the U.S. and China. As concern mounts, investors have been looking for safety, and with the U.S. upbeat on growth and the Fed raising rates, American assets are appealing. For many that means a shift into dollars, spurring the greenback and adding another headwind to emerging markets.
Elsewhere, New Zealand’s dollar fell to its weakest in six months after data showed first-quarter growth slowed, bolstering the case for the central bank to keep rates at a historic low. Philippine stocks tumbled as the nation’s finance chief played down concerns about inflation, a falling currency and a trade deficit.
Here are some key events to watch for this week:
The Bank of England’s policy decision is due on Thursday. Also on Thursday: U.S. jobless claims. The Organization of Petroleum Exporting Countries meets in Vienna on Friday.
And here are the main market moves:
Stocks
The Stoxx Europe 600 Index advanced 0.3 per cent as of 8:02 a.m. London time, the largest gain in a week. Futures on the S&P 500 Index gained 0.2 per cent. The U.K.’s FTSE 100 Index advanced 0.4 per cent to the highest in a week on the largest gain in a week. Germany’s DAX Index increased less than 0.05 per cent. The MSCI Emerging Market Index sank 0.8 per cent to the lowest in almost nine months. The MSCI Asia Pacific Index sank 0.6 per cent to the lowest in more than six months.
Currencies
The Bloomberg Dollar Spot Index advanced 0.3 per cent to the highest in about a year on the largest gain in a week. The euro declined 0.3 per cent to $1.154, the weakest in 11 months. The British pound decreased 0.3 per cent to $1.3128, the weakest in about seven months. The Japanese yen dipped 0.3 per cent to 110.64 per dollar. The Turkish lira sank 0.7 per cent to 4.7639 per dollar, the weakest on record.
Bonds
The yield on 10-year Treasuries decreased one basis point to 2.93 per cent. Germany’s 10-year yield increased less than one basis point to 0.38 per cent, the largest increase in more than a week. Britain’s 10-year yield gained less than one basis point to 1.297 per cent. Italy’s 10-year yield increased less than one basis point to 2.55 per cent.
Commodities
West Texas Intermediate crude declined 0.6 per cent to $65.32 a barrel. Gold dipped 0.4 per cent to $1,262.83 an ounce, hitting the weakest in six months with its fifth consecutive decline. Brent crude fell 0.9 per cent to $74.10 a barrel.
--With assistance from Sophie Caronello and Andreea Papuc .
Bloomberg