Stocks dip ahead of US inflation data; dollar extends fall, yen rises

Oil hits two-month low, gold climbs

NEW YORK, Feb 13, (Agencies): US bond yields and world equity markets dipped on Tuesday, ahead of a widely anticipated US inflation report later this week that may provide some indication of the pace of future interest rate hikes by the Federal Reserve.

Major stock indexes in the US and Europe inched lower and a gauge of global equity performance fell modestly, with gains in Asian heavyweights Tencent, Samsung, Alibaba and Taiwan Semiconductor offsetting some downward pressure.

Economists expect the US consumer price index to have risen month over month by 0.3 percent in January with a core reading of 0.2 percent when the Labor Department report is released on Wednesday, according to a Reuters poll.

The prospect of heightening inflation and a US budget that contemplates even greater deficit spending could lead to a radical repricing of all fixed-income assets, he said.

MSCI’s gauge of stock markets in 47 countries was down just 0.03 percent and its emerging markets index rose 1.00 percent.

In Europe, the pan-regional FTSEurofirst 300 index closed down a provisional 0.56 percent and stocks on Wall Street trended lower.

The Dow Jones Industrial Average fell 118.7 points, or 0.48 percent, to 24,482.57. The S&P 500 lost 8.9 points, or 0.34 percent, to 2,647.1 and the Nasdaq Composite dropped 13.40 points, or 0.19 percent, to 6,968.56.

The market sell-off this month that led to stocks to decline 10 percent from a record peak last month and a jump in volatility will not damage the US economy’s overall strong prospects, Mester told the chamber of commerce in Dayton, Ohio.

The Japanese yen rose to a fivemonth high on the back of broadbased selling of the dollar.

The dollar index fell 0.61 percent, with the euro up 0.56 percent to $1.236. The Japanese yen strengthened 0.97 percent versus the greenback at 107.62 per dollar.

Oil fell to its lowest in two months, giving up early gains after a forecasting agency estimated world crude supply could overtake demand this year, potentially undermining producer efforts to curb supply.

The Paris-based International Energy Agency raised its forecast for oil demand growth in 2018 to 1.4 million barrels per day, from a previous projection of 1.3 million bpd.

US crude fell 23 cents to $59.06 per barrel and Brent was down 11 cents at $62.48.

US

Wall Street’s main indexes fell for the first time in three sessions on Tuesday as caution crept in ahead of crucial data on inflation, a root cause of the recent sell-off.

After a wildly volatile week that pushed the market into correction territory, US stocks gained roughly 3 percent over Friday and Monday, their best two-day gains since June 2016.

By 11:09 am ET, the Dow Jones Industrial Average was down 96.29 points, or 0.39 percent, at 24,504.98, the S&P 500 was down 8.64 points, or 0.33 percent, at 2,647.36 and the Nasdaq Composite was down 6.63 points, or 0.09 percent, at 6,975.34.

Nine of the 11 major S&P indexes were lower, led by losses in the healthcare and financial indexes.

Benchmark US 10-year Treasury yields were hovering at 2.8439 percent, shy of their four-year peak of 2.9020 percent on Monday.

The CBOE Volatility Index, a widely-followed measure of shortterm stock volatility, eased to near session-lows at 25.51, and well short of the 50-point mark it touched last week.

The recent pullback has wiped out all of the year’s gains for the benchmark S&P 500 and the blue-chip Dow, which are now down about 0.7 percent so far in 2018.

The tech-heavy Nasdaq was still clinging to a 1.22 percent gain for the year.

Of the 70 percent of the S&P 500 companies that have reported earnings, nearly 78 percent of them topping profit expectations, according to Thomson Reuters data. That is above the 72 percent average beat-rate in the past four quarters.

Shares of Under Armour rose more than 18 percent after the sportswear maker reported quarterly revenue that beat analysts’ estimates.

AmerisourceBergen jumped about 8 percent after the Wall Street Journal reported Walgreens made a takeover approach for the drug distributor. Walgreens rose marginally.

Henry Schein and Patterson Companies fell 10 percent and 9 percent, respectively, after a US Federal Trade Commission complaint against the dental supply companies.

Their losses were the biggest among healthcare distributors weighing up the possible ramifications of the AmerisourceBergen deal and a report of Amazon’s push into the space.

Declining issues outnumbered advancers on the NYSE by 1,527 to 1,240. On the Nasdaq, 1,352 issues fell and 1,346 advanced.

Europe

European shares fell slightly on Tuesday as a flurry of corporate results failed to lift indexes and Wall Street pulled back ahead of Wednesday’s crucial data on US inflation.

The pan-European STOXX 600 benchmark index fell 0.6 percent but remained above the near six-month low hit earlier this month, while the S&P 500 in the United States fell slightly following two days of gains.

A strong reading on US consumer prices could revive concerns over inflation and faster interest rate hikes — the same worries that sparked last week’s sell-off in global equities.

A flurry of corporate results yielded both positive and negative reactions on European trading floors.

The telecoms sector led sectoral fallers in Europe after Telenet reported 2017 results. The Belgian operator fell more than 5.5 percent, the worst performer on the STOXX.

Shares in Gucci owner Kering slid 3.9 percent despite the luxury group reporting stronger-than-expected Q4 sales growth. Traders said Kering’s comments on the euro hurt sentiment. Rival LVMH lost 1.8 percent. Smelter Aurubis fell 8 percent after its results fell short of the average forecast in a Reuters poll.

On the other hand, shares in French video game producer Ubisoft rose 6.1 percent after a trading update which took it to the top of the STOXX 600.

Randstad, the world’s second-largest staffing company and a bellwether for the economy, saw fourth-quarter core profit rise 15 percent, buoyed by a strong recovery in the European job markets. Its shares gained 2 percent.

European travel group TUI rose 1.2 percent after reporting that summer bookings for Turkey were recovering, echoing comments by rival Thomas Cook and adding to hopes that pressure on margins for tour operators may ease.

Advertising agencies Publicis and WPP both rose more than 3.5 percent.

Traders said their stocks were supported by news that Unilever had threatened to pull investment from digital platforms such as Facebook and Google that “create division” in society or fail to protect children.

Asia

Asian markets mostly rose Tuesday, tracking another rally in New York after last week’s battering, but early gains were tempered and Tokyo ended down on lingering uncertainty and worries about further turmoil.

But Asian traders were broadly optimistic on Tuesday, though they pared morning gains.

Hong Kong rose 1.3 percent and Shanghai finished one percent higher as dealers in China begin to wind down ahead of the long Lunar New Year break. Sydney climbed 0.6 percent, Singapore jumped more than one percent and Seoul was up 0.4 percent.

Jakarta, Manila, Bangkok and Wellington were also well up.

On currency markets, the dollar continued to struggle against the yen on lingering uncertainty, with investors seeking solace in the safe-haven Japanese unit. The pound and euro were also stronger.

The more positive mood also supported high-yielding currencies, with the Australian dollar, South Korean won, Thai baht and Mexican peso all higher against the greenback.

Key figures around 0820 GMT Tokyo — Nikkei 225: Down 0.7 percent at 21,244.68 (close)

Hong Kong — Hang Seng: Up 1.3 percent at 29,839.53 (close)

Shanghai — Composite: Up 1.0 percent at 3,184.96 (close)

Dollar/yen: Down at 107.73 yen from 108.64 yen

Oil

Oil fell to its lowest in two months on Tuesday, giving up early gains after a forecasting agency estimated world crude supply could overtake demand this year, potentially undermining producer efforts to curb supply.

The Paris-based International Energy Agency raised its forecast for oil demand growth in 2018 to 1.4 million barrels per day, from a previous projection of 1.3 million bpd.

However, rapidly rising output, particularly in the United States, could well outweigh any pick-up in demand and begin to push up global oil inventories, which are now within sight of their five-year average.

Brent crude futures fell 72 cents to $61.87 a barrel by 1448 GMT, while US West Texas Intermediate crude futures dropped 78 cents to $58.51.

The Organization of the Petroleum Exporting Countries said on Monday it expected world oil demand to climb by 1.59 million bpd this year, an increase of 60,000 bpd from the previous forecast, reaching 98.6 million bpd.

European equity markets were broadly steady, as gains in travel and leisure stocks offset losses in telecoms. Last week’s volatile trading had seen major indexes record some of their biggest one-day falls.

The private American Petroleum Institute is due to publish crude inventory estimates on Tuesday, while the US government’s Energy Information Administration releases fuel storage and crude production data on Wednesday.

Gold

Gold rose for a second day on Tuesday as the dollar slipped in the face of a recovery in global equities, which dampened appetite for the US currency as a safe store of value.

A retreat in the dollar, in which the precious metal is priced, has helped gold pull back nearly 2 percent from last week’s one-month low of $1,306.81 an ounce.

Spot gold was up 0.2 percent at $1,324.86 by 1519 GMT, while US gold futures for April delivery were 0.1 percent higher at $1,327.00.

While bullion is sometimes seen as a haven from risk, it benefited little last week from the slide in equities as investors moving out of stocks broadly sought refuge in the dollar, trumping other drivers.