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Global stocks fall after weak car sales, yen rises

Apr 04 2017 14:04
Bloomberg: Eddie van der Walt and Adam Haigh

London - Stocks took direction from weaker US equities overnight as carmakers reported disappointing trade. Gold strengthened with the yen and dollar while the rand dropped on a ratings downgrade.

A gauge of global shares fell a third day after auto companies’ monthly sales offered a warning that Americans may have become more thrifty.

The rand extended declines for a seventh day after the country lost its investment-grade credit rating from S&P Global Ratings for the first time in 17 years. Gold headed for the highest close since the aftermath of the US election and the yen was the top performer among major currencies.

Investors are taking stock ahead of a key US payrolls report on Friday and minutes from the Federal Reserve’s latest meeting on Wednesday. After the best quarter for US equities since 2013, traders are starting to question whether optimism about US President Donald Trump’s pro-growth policies has gone too far. 

Veteran money manager Bob Doll wrote in an April 3 letter to clients that sentiment on the economy may be too high, leaving investors vulnerable to negative surprises.

“The hard data is beginning to wobble and that’s going to cause some of the Trump trades to come under pressure,” Tim Haywood, investment director at GAM said in an interview with Bloomberg TV. “Dents in car sales are perhaps an early warning of a little bit of weakness in the US economy.”

What investors will be watching this week:

Fed speakers include William Dudley, president of the New York Fed, and Governor Daniel Tarullo. Minutes from the March meeting, which are scheduled to be released April 5, should put their recent public comments into perspective.

Minutes are also due from the European Central Bank’s latest gathering. France’s presidential candidates assemble for another TV debate on Tuesday.

Moody’s Investors Service placed South Africa on review for a credit-rating downgrade; the company’s scheduled review is set for Friday China’s President Xi Jinping will meet US President Donald Trump for two days starting April 6. US non-farm payrolls are due April 7.

Here are the main moves in markets:

Currencies

The yen rose 0.4% to ¥110.47/$ as of 12:52, after climbing at least 0.4% in each of the previous two sessions. The Bloomberg Dollar Spot Index added 0.3%. The rand dropped 0.5% against the dollar. The currency has tumbled 11% over the past seven days, the longest streak since August, amid a cabinet purge by President Jacob Zuma.

The euro and the pound were 0.3% weaker.

Stocks

The MSCI All Country World Index fell 0.1%, extending its longest decline in almost two weeks. The Stoxx Europe 600 index was little changed, as declines in auto stocks weighed against gains in energy shares. Futures on the S&P 500 lost 0.2%. The underlying gauge slid 0.2% on Monday.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.326%, after declining seven basis points on Monday.  Yields on South African benchmark dollar bonds climbed three basis points to 5.13% after rising seven points on Monday.

Commodities

Oil climbed 0.5% to $50.49 per barrel, after dropping 0.7% on Monday. Gold rose 0.3% to $1 257.60 an ounce, heading for the highest close since November 10.

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