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New York - US stocks were higher on Tuesday with technology shares shaking off Monday’s slide. The euro extended its decline in the wake of the German election, lending support to a dollar rally as investors digest a raft of catalysts from North Korea to central-bank policy.
The Nasdaq 100 Index climbed at the open, taking back some of Monday’s 1.1% decline. Emerging-market stocks headed for only their second four-day retreat this year, while equities in Europe were directionless as America continued to pursue a diplomatic solution to the crisis in North Korea.
The euro fell to a five-week low following the steepest drop of the year on Monday, while the dollar hit its highest level since August.
The Swiss franc and the yen pared some of the previous day’s gains, which followed North Korea’s declaration it could shoot down US warplanes. WTI crude declined, though was still close to a five-month high after Turkey threatened to shut down Kurdish crude shipments.
Markets seem to have been oscillating between risk-on and risk-off stances since early August as tensions simmer on the Korean Peninsula.
Equities have edged away from recent record highs as the US and North Korea trade threats, and now an assortment of global political risks look set to further cloud the outlook, not least the worry that gains for far-right parties in Germany’s vote signal a new populist bent in Europe. Italy is dues to go to the polls next year.
“As we saw with the German elections, the populist undercurrent is still there in Europe,” Charles Diebel, head of rates at Aviva Investors on London, said in an interview with Bloomberg TV’s Mark Barton.
“If that continues and we see a little bit of a dip in Italian growth and a little bit more pessimism, you don’t know what that election outcome could be, and that could be more fundamental to the progress for Europe.”
Alongside geopolitics, this week’s bevy of central bank speakers continues to offer more clues to the path of monetary policy and the fate of stimulus. It’s Federal Reserve chair Janet Yellen’s turn on Tuesday, who will weigh in as policy makers continue to disagree on whether to raise US interest rates again this year.
Finally investors will be monitoring the ongoing saga that President Donald Trump’s domestic policies have become in a bid to gauge the chances of any meaningful tax reform in the world’s biggest economy.
What to watch out for this week:
• The central bank speaking roster continues.
• Markets will be watching a speech by the Fed’s Yellen on Tuesday.
• Later in the week, Bank of England Governor Mark Carney appears, as does soon-to-depart Fed Vice chairperson Stanley Fischer.
• US data on new-home sales on Tuesday and durable-goods orders, GDP and personal spending later in the week will provide further clues as to the Fed’s policy path.
• Brexit negotiations are getting underway again.
• Spanish Prime Minister Mariano Rajoy will meet US President Donald Trump in Washington on Tuesday while his team back in Madrid attempts to turn the screws on a secessionist push in Catalonia.
• The eurozone inflation rate may have accelerated a touch to 1.6% in September from 1.5% but the core will probably remain at 1.2% when data is out on Friday.
And here are the main moves in markets:
Stocks
• The S&P 500 Index was up 0.2% as of 9:42 in New York.
• The Stoxx Europe 600 Index declined 0.2%.
• The UK’s FTSE 100 Index was little changed, while Germany’s DAX Index was up 0.2%.
• The MSCI All-Country World Index sank 0.4% to the lowest in nearly two weeks.
• The MSCI Emerging Market Index sank 0.4% to the lowest in almost three weeks.
Currencies
• The Bloomberg Dollar Spot Index gained 0.4% to the highest in five weeks.
• The euro sank 0.6% to $1.1781, the weakest in five weeks.
• The
British pound dipped 0.4% to $1.3415, the weakest in more than a week.
• The Swiss franc fell 0.5% to $0.9719, the weakest in six weeks.
Bonds
• The yield on 10-year Treasuries was unchanged at 2.22%.
• Germany’s 10-year yield increased less than one basis point to 0.40%.
• Britain’s 10-year yield gained one basis point to 1.346%.
Commodities
• West Texas Intermediate crude fell 0.6% to $51.92 a barrel.
• Gold declined 0.9% to $1 299.05 an ounce.
Asia
• Japan’s Topix index closed flat after trading in a narrow range.
• South Korea’s Kospi index fell 0.3% and Australia’s S&P/ASX 200 Index lost 0.2%.
• Hong Kong’s Hang Seng Index added less than 0.1% after slumping 1.4% on Monday as Chinese property developers tumbled on fresh mainland home curbs.
• The Japanese yen decreased 0.2% to 111.98 per dollar.
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