European stocks slide, dollar extends decline

European stocks started 2018 in the red, failing to capitalise on a positive Asian session as the strength of the region’s common currency weighed on exporters. The dollar weakened against all G-10 peers and Treasuries dropped.

The Stoxx Europe 600 Index slipped, with automakers leading the decline as most industry sectors fell. In Asia, the MSCI Asia Pacific Index climbed to a record, though markets in Tokyo remain closed until Thursday for Japanese holidays.

Chinese equities led gains as property shares soared and a gauge of the nation’s manufacturing strength beat expectations.

European bonds dropped and the euro strengthened to a four-month high against the dollar as the region’s manufacturing activity expanded in line with estimates in December. The Bloomberg Dollar Sport Index hit a new three-month low, helping propel gold to the highest since September.

West Texas oil advanced toward $61 as protests continued in Iran. Bitcoin extended Monday’s losses.

Investors begin 2018 on the heels of a winning year for equities and a losing one for the greenback. Global stocks last year posted their best performance since 2009, fuelled by a synchronous expansion and a go-slow approach toward monetary-stimulus withdrawal in major economies.

What to watch for:

The US Markit manufacturing PMI is due on Tuesday. MiFID II, the biggest change to European investment industry rules in a decade, takes effect on Wednesday. FOMC December meeting minutes also expected on Wednesday. US non-farm payrolls due on Friday.
Terminal users can read more in our markets blog.

These are the main moves in markets:

Stocks

The Stoxx Europe 600 Index declined 0.5% as of 10:17am. London time, the lowest in almost four weeks. The UK’s FTSE 100 Index dipped 0.4%. Germany’s DAX Index sank 1% to the lowest in almost 14 weeks.

The MSCI Asia Pacific Index advanced 0.8% to the highest on record.

The MSCI Emerging Market Index jumped 1.1% to the highest in almost seven years. Futures on the S&P 500 Index climbed less than 0.05%.

Currencies

The Bloomberg Dollar Spot Index declined 0.4% to 1 154.36, the lowest in 14 weeks. The euro advanced 0.4% to the strongest in about three years. The British pound climbed 0.3% to $1.3546, the strongest in almost 15 weeks.

The Japanese yen increased 0.3% to 112.26 per dollar, the strongest in more than a month.

Bonds

The yield on 10-year Treasuries gained two basis points to 2.43%. Germany’s 10-year yield increased two basis points to 0.45%, the highest in almost 10 weeks. Britain’s 10-year yield advanced six basis points to 1.247%, the highest in more than a week.

Commodities

West Texas Intermediate crude dipped 0.2% to $60.32 a barrel. Gold gained 0.6% to $1 310.27 an ounce, the highest in 14 weeks. Copper dipped 0.5% to $3.28 a pound, the lowest in a week.