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Europe stocks track Asia losses; dollar, oil climb

Aug 10 2017 10:32
Adam Haigh and Samuel Potter, Bloomberg

Sydney - Tension surrounding the Korean peninsula once again sapped global equity markets, with European stocks following their Asian peers into the red as the rhetoric continued and investors remained on edge. The dollar strengthened a day before US inflation data, and oil advanced.

The Stoxx Europe 600 Index headed for a second day of declines after equity measures from Hong Kong to Tokyo to Sydney dropped and as US index futures fell. The greenback was firmer against all but one of its G-10 peers.

Japan’s yen edged higher, extending yesterday’s increase as havens including gold continued to find support. Oil held gains above $49 a barrel as US production eased and crude inventories extended declines.

“The North Korea situation is still unstable and investors are controlling risk and taking profit after recent gains,” said Sam Chi Yung, a Hong Kong-based senior strategist at South China Financial Holdings.

Geopolitical tensions may be the trigger for the latest bout of risk aversion, but with global equities trading near record highs and yield premiums on high-yield debt creeping up, some of the biggest names in the asset management industry have already been warning that it’s time to take risk off the table.

Pimco told investors to pare US equities and junk bonds, but keep exposure to real assets, such as inflation-linked debt, commodities and gold. T. Rowe Price cut its stock allocation to the lowest level since 2000.

Morgan Stanley strategists said investors should consider betting against US junk-bonds as recent price weakness may be the beginning of a correction.

Here are some important upcoming events:

• The Philippine central bank will probably hold its benchmark at 3% on Thursday at the first meeting at which Governor Nestor Espenilla will preside.

• UK factory output for June is due on Thursday.

• The Fed’s William Dudley delivers opening remarks at the Economic Press Briefing on Wage Inequality in the Region in New York City, followed by a question and answer session.

Here are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index fell 0.2% as of 09:50.

• The UK’s FTSE 100 Index fell 0.6% while Germany’s DAX Index declined 0.2%.

Currencies

• The Bloomberg Dollar Spot Index rose 0.2% in its fifth straight advance.

• The euro and British pound both weakened 0.3%.

Bonds

• The yield on 10-year Treasuries declined less than one basis point to 2.24%.

• Germany’s 10-year yield climbed one basis point to 0.44%.

• France’s 10-year yield rose one basis point to 0.723%.

Commodities

• West Texas Intermediate crude climbed 0.4% to $49.74 a barrel, the highest in more than a week.

• Gold gained 0.1% to $1 278.57 an ounce, the strongest in two months.

Asia

• Japan’s Topix index ended less than 0.1% lower, while South Korea’s Kospi index slid 0.4%, adding to a 1.1% drop on Wednesday.

• The Hang Seng Index in Hong Kong fell 1.1%.

• Australia’s S&P/ASX 200 Index lost 0.1%.

• The MSCI Asia Pacific Index fell 0.5%.

• The won dropped to a four-week low and was trading 0.6% down at 1 141.55, while the yen rose 0.1% to 110.

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equities  |  markets  |  global markets

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