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London - US stocks edged lower, while the dollar strengthened versus the yen in listless trading before Federal Reserve Chair Janet Yellen testifies to Congress this week and companies begin to deliver second-quarter results.
The S&P 500 Index was little changed in weak trading, while technology shares retreated before banks kick off earnings on Friday.
European equities declined as energy producers slid when crude briefly slumped below $44 a barrel on speculation production caps are being breached. Petro-currencies including Russia’s ruble and Norway’s krone led declines. Bonds extended losses triggered by last week’s hawkish rhetoric from central bankers.
The reversal has exposed mounting doubt over a risk rally that has taken stocks to all-time highs. Analysts have started to cut their forecasts for company earnings amid concern valuations are elevated. Central banks are moving towards tighter policy after almost a decade of stimulus even though macro data show a mixed outlook, creating concern they could sap a global growth recovery.
“More hawkish comments out of key central banks in the final weeks of the second quarter had many in the markets questioning whether the win-win outcome for investors can really continue,” strategists at JPMorgan Asset Management said in a research note.
“Now, especially, investors need to decide which is more important for asset markets: monetary policy or the underlying state of the recovery.”
Here’s what investors will be watching:
PepsiCo is due to report second-quarter results Tuesday and JPMorgan Chase & Co, Citigroup and Wells Fargo & Co on Friday. Federal Reserve chair Janet Yellen’s testimony before Congress will be in focus later this week as investors look for guidance on when the US central bank could start reducing its balance sheet.
The UK government is due to publish it’s Repeal Bill on membership of the European Union this week. The Bank of Canada announces its interest-rate decision tomorrow, with a hike expected by most analysts.
These are the main moves in markets:
Stocks
The S&P 500 fell less than one point to 2 426.44 as of 15:31. The Euro Stoxx 50 Index lost 0.4% following a 0.4% gain on Monday. The MSCI Emerging Market Index jumped 0.7%.
Commodities
West Texas Intermediate crude dropped 1% to $43.95 a barrel before US government data forecast to show crude stockpiles extended declines. Gold was down 0.3% to $1 210.51 an ounce, near the lowest since March on expectations of tighter monetary policy.
Spring wheat rose 1.6% to $8.1250 a bushel on the Minneapolis Grain Exchange, surging 51% this year amid concerns drought in US Northern Plains will curb output to a 15-year low.
Bonds
The yield on 10-year Treasuries rose one basis point to 2.39%. The yield on 10-year bunds added one basis point to 0.55%. Benchmark gilt yields increased a similar amount, reversing direction after a two-day recovery.
Currencies
The Bloomberg Dollar Spot Index gained 0.1%, with the greenback strengthening against all its G-10 peers except the pound. The pound added 0.2% to $1.2903 while the euro traded little changed.
Asia
The yen weakened 0.3% to ¥114.33/$, extending declines to a third day. Japan’s Topix Index climbed 0.7%. Hong Kong’s Hang Seng Index strengthened 1.6%, heading for its first back-to-back gain in three weeks.
The Hang Seng China Enterprises Index soared 2.1%, its biggest advance since March 16. The Shanghai Composite Index was down 0.3% after a short-lived advance mid-afternoon local time. Other indices on the mainland were also lower.
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