EghtesadOnline: The risk-off mood gripping global markets showed little sign of easing as European stocks followed declines in Asia. Taking impetus from a selloff in energy commodities, the slide also spread to U.S. equity futures as bonds and gold advanced with the yen and euro.
The Stoxx Europe 600 Index fell a seventh day after Japan’s Topix index retreated for a fifth session, both in their longest losing streaks in a year. S&P 500 futures fell 0.5 percent. Mining and oil-related companies set the tone, with the Bloomberg Commodities Index in its longest slide since June. WTI crude declined through $55 a barrel after industry data showed U.S. stockpiles unexpectedly rose last week and as Russia was said to waver on extending output cuts, Bloomberg reported.
With the dollar near a three-week low, Treasuries led bonds higher. The pound erased gains after the U.K. labor market showed weakness. Meanwhile a selloff in high-yield credit continued, with an index of sub-investment grade European credit default swapsrising 6.5 basis points.
A cautious tone has swept into markets in recent days as new obstacles emerged to the U.S. overhauling taxes and after many stock gauges approached record highs. Attention now turns to data coming Wednesday on U.S. consumer prices and retail sales for clues on the strength of the world’s largest economy after the flattest American yield curve in a decade raised concern that growth will slow.
“So far we don’t see that much disruption in sentiment, so I think we are just taking a bit of froth off the top of the market at the moment,” Michael Metcalfe, global head of macro strategy at State Street Global Markets, said on Bloomberg TV. “It would be dangerous to say this is the unwinding of a bubble -- the fact that it’s being led by Japan actually tells you that, because there isn’t a valuation case to sell Japanese stocks.”
Amid the global equity pullback, Morgan Stanley advised staying overweight stocks and avoiding the temptation to sell even as valuations appear stretched. Current indicators used by the New York-based bank’s cross-asset strategy team are showing strong macro-economic data favoring a tilt to shares, with low allocation to high-yield credit.
Here are some key events investors are watching this week:
- Bank of England officials address the bank’s future on Thursday, while European Central Bank chief Mario Draghi speaks Friday.
- A string of Fed appearances may further illuminate the FOMC’s commitment to a December hike.
- U.S. CPI and retail sales data will be released Wednesday morning.
And these are the main moves in markets:
- The Stoxx Europe 600 Index dipped 0.8 percent as of 7:57 a.m. New York time, hitting the lowest in two months with its seventh consecutive decline.
- The MSCI All-Country World Index declined 0.2 percent, reaching the lowest in almost three weeks on its fifth consecutive decline.
- The U.K.’s FTSE 100 Index dipped 0.5 percent, hitting the lowest in almost seven weeks with its fifth consecutive decline.
- Germany’s DAX Index dipped 0.9 percent, reaching the lowest in more than six weeks on its fifth consecutive decline.
- The MSCI Emerging Market Index fell 0.4 percent, hitting the lowest in almost three weeks with its fifth consecutive decline.
- Futures on the S&P 500 Index sank 0.4 percent to the lowest in almost three weeks on the biggest dip in 10 weeks.
- The Bloomberg Dollar Spot Index fell 0.2 percent to the lowest in almost four weeks.
- The euro climbed 0.3 percent to $1.1835, reaching the strongest in almost four weeks on its sixth consecutive advance.
- The British pound declined less than 0.05 percent to $1.3164.
- The yield on 10-year Treasuries declined three basis points to 2.34 percent, the lowest in a week.
- Germany’s 10-year yield dipped four basis points to 0.36 percent, the lowest in a week on the biggest decrease in almost three weeks.
- Britain’s 10-year yield fell five basis points to 1.273 percent, the largest drop in almost two weeks.
- Gold advanced 0.4 percent to $1,285.29 an ounce, the highest in almost four weeks on the biggest gain in a week.
- West Texas Intermediate crude fell 1.1 percent to $55.10 a barrel, the lowest in almost two weeks.
- The Topix closed 2 percent lower in Tokyo to seal its longest streak of losses since September 2016. The Nikkei 225 Stock Average was down 1.6 percent.
- Australia’s S&P/ASX 200 Index declined 0.6 percent and the Kospi index in Seoul was down 0.3 percent.
- Hong Kong’s Hang Seng Index fell 1 percent and the Shanghai Composite Index was down 0.8 percent.
- The Japanese yen climbed 0.6 percent to 112.78 per dollar, the strongest in almost four weeks on the biggest increase in almost 10 weeks.