BLBG: U.S. Stocks Slip From Records as Gold, Oil Lead Commodities Down
U.S. stocks fell from records as crude slid below $44 a barrel amid a surplus, while gold fell as the dollar gained before central bank meetings in the U.S. and Japan this week.
The S&P 500 Index retreated with energy shares pacing declines among nine of 10 main groups in the gauge. Equity markets in Europe got a boost from a report showing Germany’s business climate remained robust after Britain voted to secede. Gold extended its first back-to-back weekly drop since May as the U.S. currency gained against most of its 16 counterparts. Turkish markets rallied the most worldwide after the prime minister said the government will set up a fund to support the economy following the failed coup.
Global equities were little changed before key central-bank policy meetings and as investors await a slew of corporate results. U.S. equities advanced to a fresh record Friday amid signs of strength in the American economy that prompted traders to increase bets the Federal Reserve will raise rates by year-end. While the Fed will probably keep rates on hold this week, economists predict the Bank of Japan will add to stimulus. The European Central Bank last week said it would be ready, willing and able to act if needed.
“Earnings are the key this week, but there’s also the Fed, the Bank of Japan and the Democratic National Convention, so you have a lot of things that go right or wrong,” said John Canally, chief economic strategist at LPL Financial, which oversees about $479 billion in Boston. “We’ve run the market up to new all-time highs at peak valuations, so we have to hit a home run on earnings to get much higher from here.”
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Stocks
The Stoxx 600 climbed 0.3 percent by 9:45 a.m. in New York, with trading volumes 45 percent less than the 30-day average. Ryanair Holdings Plc rose 6 percent after maintaining its annual profit forecast. Ericsson AB advanced 2.3 percent after its chief executive officer stepped down. Julius Baer Group Ltd. increased 4.4 percent after adding new client money.
The S&P 500 Index lost 0.2 percent. Yahoo! Inc. agreed to sell its main web businesses to Verizon Communications Inc. for $4.8 billion. Yahoo fell 0.8 percent after the announcement and Verizon slipped 0.4 percent.
The Borsa Istanbul 100 Index added 3.3 percent after Prime Minister Binali Yildirim ruled out early elections and said Turkey plans a multi-billion dollar infrastructure fund to keep growth on track. The stock measure sank 13 percent last week, the most since 2008, amid sweeping purges of those accused of complicity in the failed attempt July 15 by military officers to seize power.
In Asia, Nintendo Co. shares plunged by the most since 1990 after the company said late Friday that the financial benefits from the worldwide hit Pokemon Go will be limited. The stock sank 18 percent to 23,220 yen at the close in Tokyo, the maximum one-day move allowed by the exchange, wiping out 708 billion yen ($6.7 billion) in market value.
Currencies
The dollar advanced against 13 of its 16 peers, climbing at least 0.7 percent against Mexico’s peso and Canada’s dollar. The Bloomberg Dollar Spot Index added 0.2 percent, headed for the highest close since March.
Turkey’s lira climbed 1.1 percent, the most among 31 major currencies.
Singapore’s dollar fell 0.2 percent to the lowest in almost a month. The city-state’s central bank, which uses the exchange rate rather than interest rates as its main tool, said the current monetary policy stance is appropriate as it forecast inflation may turn positive later this year. The Malaysian ringgit weakened for a sixth straight day, losing 0.2 percent.
Commodities
West Texas Intermediate crude slipped 2.1 percent to $43.28 a barrel after sliding 1.3 percent on Friday to its lowest settlement since May 9. Rigs targeting oil in the U.S. rose for a fourth week to 371, the longest run of gains since August, according to Baker Hughes Inc. Money managers also added the most bets in a year on falling WTI prices during the week ended July 19, according to Commodity Futures Trading Commission figures.
“The general tone for the market at the moment is soft to sideways,” Ric Spooner, chief analyst at CMC Markets in Sydney, said by phone. “It’s being weighed down by U.S. dollar strength against a background of relatively high inventories and the fact the rig count has begun to creep up.”
Precious metals declined, with gold extending the first back-to-back weekly drop since May, falling 0.6 percent to $1,314.26 an ounce as buoyant equity markets and expectations for higher U.S. interest rates hurt demand. Silver retreated 0.9 percent, while palladium declined 1.1 percent.
Bonds
Treasuries maturing in a decade were little changed at 1.57 percent before an auction of $26 billion of two-year notes, the first of $103 billion of planned offerings of coupon-bearing securities this week.
U.K. gilts declined for the first time in three days, pushing the two-year yield up by two basis points to 0.14 percent, while that on 10-year securities were at 0.82 percent, an increase of three basis points from the close on Friday.
A month after voters opted for Brexit, U.K. bonds are yielding the least in 16 years relative to their U.S. counterparts, reflecting speculation that the Bank of England will loosen policy to mitigate the economic impact of the vote. The extra yield, or spread, that investors get for holding U.S. two-year notes instead of similar-maturity gilts was at 58 basis points, the most since May 2000, based on closing Bloomberg generic prices.
The cost of insuring corporate debt against default declined for the third time in four days. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies dropped one basis point to 67 basis points. An index of swaps on junk-rated businesses declined two basis points to 316 basis points.
