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Wellington - The dollar’s strength weighed on precious metals as investors looked toward central bank meetings this week in the US and Japan. Oil held losses after sliding to the lowest close since May, while European index futures fluctuated with Asian stocks.
Gold extended its first back-to-back weekly drop since May as the greenback strengthened against most major currencies. The yen reversed declines before a Friday policy decision where Bank of Japan Governor Haruhiko Kuroda will face the most intense expectations for more monetary stimulus since 2013.
US crude traded near $44 a barrel. Asia’s benchmark share gauge swung between gains and losses, as did futures on the Euro Stoxx 50 Index, after the S&P 500 Index ended last week at a fresh record.
US equities climbed on Friday amid signs of strength in the American economy and speculation central banks will act to cushion any blow from the UK’s Brexit vote.
An increase in purchases of exchange-traded funds is seen by economists as the most likely stimulus for the BOJ to announce this week, while the Federal Reserve is expected to stand pat on borrowing costs.
Group of 20 finance chiefs indicated concern over the anti-globalization sentiment gripping the world at a meeting in China at the weekend.
"Market expectations of the Fed raising interest rates by the end of this year have increased significantly over the last two weeks, and it is likely that the Fed could be conveying a more optimistic message about the US economy," Vyanne Lai, an economist at National Australia Bank, said by e-mail.
"This will likely bolster the strength of the dollar and weigh on gold prices."
Fed policy makers meet on July 26 to 27, with traders pricing in 10% odds of a rate rise, while the probability for a move by December rose to 45% from 12 percent at the beginning of this month.
As Europe’s earnings season continued Monday, Royal Philips NV reported second-quarter profit that rose more than expected; while Ryanair Holdings warned it may lower its fiscal 2017 profit forecast amid weakening travel demand stemming from Britain’s decision to exit the European Union.
Stocks
European equity-index contracts added 0.1% as of 7:15 a.m. in London, after falling 0.1%. Global fund managers are bailing from the region’s stocks at the fastest clip ever, even though the Euro Stoxx 50 Index yields 3.7 percentage points more than bonds in dividends and companies are on average about 25% cheaper than the S&P 500.
Japan’s Topix index slipped 0.2%, while Australia’s benchmark gauge rose 0.6%. Philippine stocks led emerging Asian gains before Rodrigo Duterte, the nation’s new president, gives his first state-of-the-union address.
About five stocks rose for every four that fell on the MSCI Asia Pacific Index, with health-care shares leading gains. Nintendo was the biggest drag on the regional gauge, sinking 18% after saying the impact of its hit Pokemon Go app on earnings will be limited.
The Asian stock measure traded at 13.5 times estimated earnings over the next 12 months, near the highest multiple since August.
"Equity markets may hold up this week ahead of the BOJ and Fed meetings on hopes that these central banks may sound dovish," Vasu Menon, vice-president for wealth management research at Oversea-Chinese Banking Corporation in Singapore, said by phone.
"The hope of future action from policy makers offers more support in the short term even though valuations may not be compelling."
S&P 500 futures slipped 0.1% following the benchmark’s 0.5% advance last session to a record 2 175.03. Telephone companies and utilities drove gains, with about 82% of earnings so far this season exceeding estimates.
Shares of Verizon Communications and Yahoo! rose at least 1% on Friday amid prospects the former will announce plans to buy the Internet company’s core assets.
Currencies
Bloomberg’s dollar index, a gauge of the greenback against 10 major peers, maintained most of Friday’s 0.3% gain. The yen traded little changed at 106.09 per dollar after weakening as much as 0.6%.
Singapore’s dollar slipped 0.2% 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 fell for a sixth straight day, losing 0.5% for the steepest decline in Asia.
"The rising dollar and pullback in commodity prices could begin to increasingly cause problems in the emerging-markets complex, which has been one of the biggest winners in the post-Brexit rebound," Angus Nicholson, a market analyst in Melbourne at IG, said in an e-mail.
Sterling added 0.2% following Friday’s 0.9% slide, which was spurred by reports suggesting manufacturing and services industries contracted in July.
Commodities
West Texas Intermediate crude slipped 0.3% to $44.05 a barrel after sliding 1.3% on Friday to its lowest settlement since May 9.
Rigs targeting oil in the US 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 US dollar strength against a background of relatively high inventories and the fact the rig count has begun to creep up."
Gold for immediate delivery lost 0.4% to $1 317.95 an ounce. Silver lost 0.7%, while palladium retreated 1%.
Copper for three-month delivery added 0.2% in London, as nickel and zinc gained at least 0.5%. Speculators boosted their net-long position in copper to 18 284 US futures and options in the week ended July 19, according to CFTC data released three days later.
That’s up from 4 868 a week earlier and was the highest since March 29.
