Dubai - A mood of caution was evident in equity markets Tuesday, with European stocks falling in a broad-based retreat. The euro jumped and the dollar fell as Mario Draghi said headwinds to inflation in the region are temporary.
The Stoxx Europe 600 Index dropped, led by automakers, though basic resources shares were among those bucking the trend as commodities advanced. Gold rebounded after an apparently erroneous order triggered a plunge in the price on Monday.
The Chinese yuan surged both onshore and overseas amid speculation of central bank intervention. Treasuries slipped before an appearance by Federal Reserve Chair Janet Yellen.
Traders will be looking to Yellen for clues on the outlook for interest rates and the American economy, especially after weakness in data yesterday added to concerns about the strength of growth. Some investors worry the Fed is taking too rosy a view as it sets the path for increasing borrowing costs.
European Central Bank President Draghi struck a cautiously optimistic tone for the euro area, noting a “strengthening and broadening recovery” but stressing the need for prudence in adjusting policy.
Meanwhile, Brazilian President Michel Temer was charged with corruption in a highly anticipated development that may put the embattled leader of Latin America’s largest economy on trial. Temer, who has denied the charges, could lose his job if indicted and found guilty.
India and Singapore reopened after holidays but many markets, including in Malaysia, Indonesia and most of the Middle East remain closed.
Here are some important upcoming events:
The inaugural session of the new French parliament will start today. The Federal Reserve is set to announce the results of the second part of its annual US bank stress test on Wednesday.
China’s PMI might have declined in June after unexpectedly remaining unchanged in May, reflecting government offers to cut overcapacity and leverage. That reading is due Friday. Also due this week: Japanese inflation, factory output, unemployment, household consumption and housing starts; rate decisions in Colombia, the Czech Republic and Armenia.
These are the main moves in markets:
Stocks
The Stoxx Europe 600 Index slipped 0.4% as of 12:10, as declines in automakers overshadowed the rally in basic resources shares. Futures on the S&P 500 Index fell 0.1%. The underlying gauge rose less than one point on Monday. The Nasdaq 100 fell 0.4%.
Currencies
The euro surged 0.6% to $1.1251. The Bloomberg Dollar Spot Index fell 0.3% after gaining 0.1% in the previous session. The British pound added 0.1% to $1.2737.
Commodities
West Texas Intermediate crude rose 0.8% to $43.73 a barrel, adding to a three-day rally following oil’s drop into a bear market. Gold increased 0.5% to $1 250.71 an ounce. The precious metal sank almost 1% on Monday.
Bonds
The yield on 10-year Treasuries rose two basis points to 2.16%, after dropping less than one basis point on Monday. European government bonds dropped across the board, with the yield on benchmark French bonds climbing six basis points and that of Germany four basis points.
Asia
China’s offshore yuan jumped as much as 0.4% in the afternoon spike, with the onshore market following with a similar move. Hong Kong’s Hang Seng index fell 0.1% and the Shanghai Composite Index advanced 0.2%.
A string of small-cap Hong Kong stocks suddenly plunged during the day, with traders pointing to links between some of the companies and a brokerage that’s under regulatory investigation. Japan’s Topix climbed 0.4% to the highest closing level since August 2015.
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