Dollar extends gain as havens slump, bonds decline

London - The dollar extended its advance and traditional haven assets including gold and the yen slumped as the prospect of war between the US and North Korea receded. Bonds across Europe declined with Treasuries, while stocks struggled for traction following Monday’s strong gains.

The greenback climbed a second day after comments from Federal Reserve Bank of New York chief William Dudley signaled another interest-rate increase this year is in the cards.

 The Stoxx Europe 600 Index edged higher after the German economy extended its growth spurt in the second quarter though at a slower pace than expected. The British pound tumbled to a five-week low after UK inflation unexpectedly held steady in July, clouding the outlook for rate increases, while oil extended a slide to below $47 a barrel.

Japan’s currency, a haven in times of global tension, slumped after the Wall Street Journal characterized a North Korean media report as indicating that dictator Kim Jong Un had decided not to launch a threatened missile attack on Guam.

The report, from KCNA on Tuesday, said Kim praised the military for drawing up a “careful plan” to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the US’s conduct “a little more.”

Meanwhile, data showed Germany’s economy expanded 0.6% in the second quarter, driven by domestic demand. That missed estimates slightly, but was accompanied by a revision in the first-quarter number. The euro retreated.

Here are some key events to watch this week:

• A crowded US data docket will give some indication of whether second-half GDP will outperform the first half.

• July retail sales are expected to rise from June, while housing starts and industrial production may be muted.

• On Wednesday, the Federal Open Market Committee will issue minutes from its July policy meeting that may hold clues to the Federal Reserve’s next rate hike.

• The same day, eurozone second-quarter GDP data is due. Chinese tech titans Tencent and Alibaba are among the companies reporting results this week.

And here are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index climbed 0.2% as of 13:55. 

• Futures on the S&P 500 Index increased 0.2%.

• The MSCI All-Country World Index declined 0.1%.

• Germany’s DAX Index jumped 0.3% to the highest in a week. 

• The UK’s FTSE 100 Index surged 0.6%.

Currencies

• The euro fell 0.4% to $1.1736, the lowest in almost three weeks on a closing basis.

• The Bloomberg Dollar Spot Index advanced 0.4% to the highest in almost four weeks. 

• The British pound declined 0.7% to $1.2871, the weakest in five weeks.

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.26%, the highest in a week. 

• Germany’s 10-year yield climbed four basis points to 0.44%, the highest in a week. 

• Britain’s 10-year yield gained three basis points to 1.102%.

Commodities

• Gold fell 0.7% to $1 273.29 an ounce. 

• West Texas Intermediate crude fell 0.7% to $47.24 a barrel, the lowest in more than three weeks.

Asia

• Japan’s Topix index finished the day 1.1% higher and Australia’s S&P/ASX 200 Index gained 0.5% at the close.

• Hong Kong’s Hang Seng index dropped 0.3% as the Shanghai Composite Index rose 0.4%.

• Markets in South Korea and India are closed on Tuesday for holidays.

• The Japanese yen sank 0.7% to 110.45 per dollar.

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