Stocks Turn Lower, Dollar Gains as Crude Oil Drops: Markets Wrap

  • Fed meeting minutes return focus to inflation; gold rises
  • ECB signals Brexit talks deadlock; Asia shares at 10-year high

Credit Agricole: Trump's Tax Reform Futile for Dollar

U.S. stocks retreated and the dollar rose slightly as investors weighed the prospects for tax reform and the Federal Reserve’s next policy move. Crude slumped following an inventory report.

The S&P 500 Index traded lower and pulled back from an all-time high as energy producers slid with oil nearing $50 a barrel and telephone shares sank after AT&T Inc. reported a substantial loss of video subscribers in the third quarter. JPMorgan Chase & Co. and Citigroup Inc. were lower after reporting third-quarter results.

Charles Peabody, analyst at Compass Point Research and Trading, discusses the start of bank earnings season.

(Source: Bloomberg)

The dollar was higher for the first time this week, while Treasury yields fell after data showed a spike in gasoline costs pushed wholesale prices higher by the most in five months. The pound briefly slumped after Brexit talks were said to reach a deadlock before turning higher. The yen rose versus the dollar, showing little reaction after Bank of Japan Governor told reporters in Washington that he intends maintain stimulus to hit an inflation target of 2 percent. Bitcoin surged to a fresh record, climbing above $5,300.

The Trump administration’s tax plan remains nebulous, as the president was said to voice frustration with certain aspects of the existing framework. Some Congressional Republicans have aired concerns, while Treasury Secretary Steven Mnuchin reiterated his confidence that a plan will get passed this year. In the meantime, investors will look to consumer price data Friday for the latest clue on inflation in attempts to assess the Fed’s next move.

“We are very much keeping an eye on the potential tax reform process,” Dennis DeBusschere, head of portfolio strategy at Evercore ISI, said by phone. “The other thing we’re focusing on is all indicators of inflation, especially post-CPI tomorrow.”

The selection of Fed Chair Janet Yellen’s replacement is also coming into focus. President Donald Trump is meeting this week with Stanford University economist and rates hawk John Taylor, who’s on the shortlist of candidates, according to people familiar.

Meanwhile, the European Union said scant progress has been made in the latest round of Brexit talks, increasing the chances of a messy departure as time is running out to clinch a deal. Lack of sufficient progress adds to pressure on businesses to speed up contingency plans for what could be a chaotic withdrawal in March 2019.

West Texas oil extended losses after three days of gains. Crude stockpiles will fall this year for the first time since prices slumped four years ago, the IEA said Thursday. Gold climbed for a fifth day. In Asia, Japanese stocks extended gains, with the Nikkei 225 Stock Average ending at the highest level since 1996.

Terminal subscribers can read more in our Markets Live blog.

What’s coming up this week:

  • The active Atlantic hurricane season will probably figure prominently in U.S. data on retail sales and consumer prices.
  • On Friday at 1 p.m. in Hong Kong, Bloomberg Intelligence Chief Asia Economist Tom Orlik and Bloomberg Asia Government’s Peter Martin will be answering your questions about China’s Communist Party Congress in a TOPLive Q&A. Follow the blog at TLIV <GO>

Here are the main moves in markets:

Stocks

  • The S&P 500 Index declined 0.2 percent to 2,550.93, and the Nasdaq Composite Index also fell 0.2 percent.
  • JPMorgan slipped 0.9 percent and Citi lost 3.4 percent.
  • The Stoxx Europe 600 Index was little changed.
  • The MSCI All-Country World Index rose less than 0.1 percent to a record.
  • The MSCI AC Asia Pacific Index jumped 0.4 percent to the highest in about 10 years.
  • Japan’s Topix index gained 0.2 percent to 1,700.13, the highest in more than 10 years.
  • The MSCI Emerging Market Index sat at the highest in more than six years.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.1 percent.
  • The euro dipped 0.2 percent to $1.1835.
  • The British pound rose 0.3 percent to $1.3262.
  • The Japanese yen advanced 0.2 percent to 112.28 per dollar, the strongest in more than two weeks.

Bonds

  • The yield on 10-year Treasuries decreased three basis points to 2.3177 percent, the lowest in two weeks.
  • Germany’s 10-year yield fell two basis points to 0.445 percent.
  • Britain’s 10-year yield was little changed at 1.381 percent.
  • Japan’s 10-year yield was essentially unchanged at 0.062 percent, the highest in two weeks.

Commodities

  • West Texas Intermediate crude declined 1.3 percent to $50.65 a barrel.
  • Gold increased 0.1 percent to $1,293.45 an ounce, the highest in more than two weeks.

— With assistance by Cormac Mullen

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