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London - The dollar climbed with US government bonds before President Donald Trump unveils his tax cut plan that could breathe new life into flagging reflation trades. The greenback wrested back some strength in early business hours on the continent, gaining against most group-of-10 currencies.
Treasuries reversed a five-day losing streak, signaling not all investors are getting behind the risk rally. West Texas Intermediate crude languished below $50 a barrel after a report on US supplies. European stocks halted a five-day advance that had taken them to the highest since 2015 as earnings painted a mixed picture on growth.
Investors are waiting to see if Trump’s conciliatory tone on the border wall could help avert a government shutdown even as most members of the Congress are in the dark about the $1.1trn spending bill. Policy reviews by the Japanese and European Central Bank may also set the tone for rest of the week.
"Markets will take a breather today before embarking on a frantic end to the week with a flurry of central bank meetings," economists at Societe Generale led by Michala Marcussen wrote in a client note.
"In the US, we see the risk of a government shutdown as low but also remain skeptical” that a “budget bill that funds the government only for an additional five months will bring” much relief.
Here are some key upcoming events that investors are watching:
Alphabet, Microsoft, Amazon.com, Twitter, Intel, Barclays, Bayer and Total are among major companies releasing results this week. The Bank of Japan is widely expected to keep the settings on its monetary easing program unchanged at the end of a two-day policy meeting on Thursday.
Though inflation remains well below the central bank’s 2% target, it’s ticking up. The ECB sets monetary policy later that same day. With officials indicating little chance of a policy change, the focus will be on any signals from President Mario Draghi that the central bank is debating an exit from its extraordinary stimulus.
US GDP is due at the end of the week. It’s projected to show the economy expanded at a 1.0% annualised rate in the first quarter, the weakest pace in a year.
Here are the main moves in markets:
Currencies
The Bloomberg Dollar Spot Index increased 0.2% as of 12:00, climbing for a second day after a 0.5% drop on Monday. The yen was little changed at 111.15 per dollar, after dropping 1.2% on Tuesday.
The euro lost 0.4% to $1.0887, after four straight days of gains. The ruble weakened 0.7% after President Vladimir Putin said the government is looking for “market-based measures” to stabilise the currency.
Stocks
The Stoxx Europe 600 Index rose 0.1%, after a five-day rally to the highest since August 2015. Japan’s Topix index rose 1.2%, climbing for a fifth straight day for the longest winning streak this year. Futures on the S&P 500 Index were flat after the underlying gauge climbed 0.6% on Tuesday, to within 10 points of its closing record.
Commodities
Gold rose 0.1% to $1 265.21, after dropping 1% on Tuesday as investors turn attention to Trump’s agenda to boost US growth. Crude resumed declines, losing 0.4% to $49.38 per barrel, after halting a six-day selloff on Tuesday.
Bonds
The yield on 10-year Treasuries fell one basis point to 2.32%, after climbing for five straight sessions. German government debt with a similar maturity saw yields fell one basis point to 0.37%.
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