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New York - The dollar rallied with US stocks and Treasuries extended their losses after US retail sales exceeded forecasts last month, boosting speculation the Federal Reserve might lift interest rates again this year. Oil fell for a second day.
Most major US equities indices opened higher, while traditional havens including gold and the yen slumped as the threat of war over North Korea receded. The Stoxx Europe 600 Index edged up after the German economy extended its growth spurt in the second quarter, albeit at a slower pace than expected.
The British pound tumbled to a five-week low after UK inflation unexpectedly held steady in July, clouding the outlook for rate increases, while oil extended a slide to below $48 a barrel.
Monthly retail sales in the world’s biggest economy advanced by the most this year in July, bolstering the case for more policy tightening. Federal Reserve Bank of New York President William Dudley earlier said he favoured another rate hike in 2017.
READ: Broad-based advance in US retail sales shows solid spending
Meanwhile, Japan’s currency - a haven in times of global tension - slumped after the Wall Street Journal characterised a North Korean media report as indicating that dictator Kim Jong Un had decided not to launch a threatened missile attack on Guam.
The report, from KCNA on Tuesday, said Kim praised the military for drawing up a “careful plan” to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the US’s conduct “a little more.”
And in Germany, data showed the economy expanded 0.6% in the second quarter, driven by domestic demand. That missed estimates slightly, but was accompanied by a revision in the first-quarter number. The euro retreated.
Here are some key events to watch this week:
• On Wednesday, the Federal Open Market Committee will issue minutes from its July policy meeting that may hold clues to the Federal Reserve’s next rate hike.
• The same day, eurozone second-quarter GDP data is due.
• Chinese tech titans Tencent and Alibaba are among the companies reporting results this week.
And here are the main moves in markets:
Stocks
• The S&P 500 Index was up less than 0.1% as of 15:43.
• The Stoxx Europe 600 Index increased 0.2%.
• The MSCI All-Country World Index declined 0.1%.
• Germany’s DAX Index jumped 0.4%.
• The UK’s FTSE 100 Index surged 0.4%.
Currencies
• The Bloomberg Dollar Spot Index jumped 0.5%.
• The euro fell 0.6% to $1.1713, the weakest in nearly three weeks.
• The British pound dipped 0.8% to $1.2867, the weakest since June.
• The Japanese yen decreased 1% to 110.72 per dollar, the biggest dip in two months.
Bonds
• The yield on 10-year Treasuries climbed five basis points to 2.27%, the highest in more than two weeks.
• Germany’s 10-year yield advanced five basis points to 0.45%, the highest in a week.
• Britain’s 10-year yield gained three basis points to 1.1%.
Commodities
• Gold declined 1% to $1 268.90 an ounce, the biggest drop in more than five weeks.
• West Texas Intermediate crude declined 0.8% to $47.22 a barrel, the lowest in more than three weeks.
Asia
• Japan’s Topix index finished the day 1.1% higher and Australia’s S&P/ASX 200 Index gained 0.5% at the close.
• Hong Kong’s Hang Seng index dropped 0.3% as the Shanghai Composite Index rose 0.4%.
• Markets in South Korea and India are closed on Tuesday for holidays.
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