Dollar Rebounds as Bonds Drop, Stocks Pare Gains

EghtesadOnline: The dollar rose with Treasury yields as investors reassessed the Federal Reserve’s signal that it intends to shrink its balance sheet. U.S. stocks fluctuated as administration officials discussed geopolitical uncertainty ahead of President Donald Trump’s meeting with his Chinese counterpart.

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06 April 2017

The S&P 500 Index erased gains in afternoon trading amid comments from Secretary of State Rex Tillerson on North Korea and Syria. The dollar rose versus the euro as Mario Draghi reaffirmed he is in no hurry to scale back stimulus. Crude topped $51.50 a barrel as investors speculated OPEC cuts would continue. Emerging-market assets slumped, Bloomberg reported.

Trades sparked by the Fed’s talk about trimming its assets reversed Thursday, as investors turned attention to Washington for clues on the Trump administration’s policy priorities.

The president meets with Chinese President Xi Jinping with a chance to confront the leader of a nation he blames for stealing millions of U.S. jobs and enabling North Korea’s march toward a nuclear missile.

Republican efforts to revamp health-care look stalled before Congress takes a two-week recess, with investors focusing on Friday’s jobs report for clues on the strength of the economy absent any boost from lower taxes and higher spending.

What investors will be looking out for:

Donald Trump and Xi begin two-day meeting in Florida today. Analyst roundup: Markets may shrug off Trump-Xi talks

Strong private payrolls data in the U.S. have bolstered the outlook for Friday’s government jobs data, providing more evidence that hiring momentum is accelerating in the world’s largest economy.

After Draghi, ECB Governing Council members from Ireland and France speak Friday.

Here are the main moves in markets:

Stocks

The S&P 500 rose 0.1 percent to 2,354.93 at 3:03 p.m. in New York, paring a gain that reached 0.5 percent. The index dropped 0.3 percent yesterday, erasing a gain of more than 0.5 percent following the Fed’s minutes.

Banks rose 0.4 percent, reversing a loss of the same amount. White House economic adviser Gary Cohn said he supports a policy that could radically reshape Wall Street’s biggest firms by separating their consumer-lending businesses from their investment banks, said people with direct knowledge of the matter.

The Stoxx Europe 600 Index rose 0.2 percent after closing little changed on Wednesday.

Currencies

The Bloomberg Dollar Spot Index added 0.2 percent following a 0.1 percent drop Wednesday. The euro traded little changed.

The South African rand regained some ground after recent declines to trade 0.1 percent higher.

The koruna appreciated 1.1 percent to 26.75 against the euro after the Czech National Bank’s board voted to exit a Swiss-inspired cap on Thursday.

Bonds

The yield on 10-year Treasuries was little changed at 2.34 percent, down from 2.39 percent at the end of last week.

Commodities

WTI crude erased an earlier drop to gain 1.1 percent to $51.73 a barrel, even after data on Wednesday showed U.S. output rose for a seventh week and inventories expanded to a fresh record.

Gold futures rose 0.4 percent to $1,254.30 an ounce.

Asia

Japanese equities led Asian losses, falling the most in two weeks to sit at the lowest in four months. The yen weakened after four days rising, while the yuan slightly weakened ahead of a meeting between Trump and Xi.