Global stocks down; dollar hits 2018 peak versus major peers

Oil prices steady, boosted by Iran fears

NEW YORK, May 15, (RTRS): The US dollar and Treasury yields jumped on Tuesday following US data showing a rise in monthly US retail sales, weighing on stocks that also were undercut by renewed worries over global trade frictions.

The yield on the benchmark US 10-year Treasury note touched its highest since July 2011, while the dollar hit its highest point of the year against a basket of currencies. Wall Street’s main stock indexes slumped, with investors concerned that rising bond yields would hurt stock valuations.

US retail sales rose moderately in April as rising gasoline prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter.

The benchmark government yield eclipsed 3.05 percent, blowing through the key psychological level of 3 percent it hit in late April for the first time in four years.

Benchmark 10-year notes last fell 17/32 in price to yield 3.0576 percent, from 2.995 percent late on Monday.

The dollar index, tracking it against six major currencies, rose 0.69 percent, with the euro down 0.61 percent to $1.1852.

On Wall Street, the Dow Jones Industrial Average fell 197.2 points, or 0.79 percent, to 24,702.21, the S&P 500 lost 19.78 points, or 0.72 percent, to 2,710.35 and the Nasdaq Composite dropped 73.24 points, or 0.99 percent, to 7,338.08.

Home Depot shares fell 1.7 percent after the home improvement chain missed Wall Street’s sales forecast.

The pan-European FTSEurofirst 300 index edged up 0.17 percent.

MSCI’s gauge of stocks across the globe shed 0.90 percent.

Oil prices hovered around multi-year highs, supported by concerns that US sanctions on Iran are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

US crude fell 0.07 percent to $70.91 per barrel and Brent was last at $78.94, up 0.91 percent on the day.

US

US stocks slipped on Tuesday after the latest retail sales data indicated rising inflation and pushed up Treasury yields, while trade worries lingered with no signs of progress in US-China talks.

The United States and China are still “very far apart” on resolving trade frictions, US Ambassador to China Terry Branstad said, as a second round of high-level talks were set to begin in Washington.

Adding to the trade woes, Mexico’s economy minister Ildefonso Guajardo said he does not expect to meet a deadline this Thursday to reach a new North American Free Trade Agreement that could be presented to the US Congress.

US retail sales increased a moderate 0.3 percent in April, compared with an upwardly revised 0.8 percent surge in March, as rising gasoline prices weighed on discretionary spending, the Commerce Department said.

However, the rise in core retail sales, which excluded automobiles, gasoline, building materials and food services, showed consumer spending appeared on track to accelerate after slowing sharply in the first quarter.

Following the data, benchmark US Treasury yield hit 3.037 percent, a key breakout level, before gaining further to 3.058 percent, its highest since July 2011.

Shares of retailers including J. C. Penney, Target and Macy’s rose between 1.6 percent to 3.9 percent.

However, losses were broad based with ten of the 11 major S&P sectors in the red. The S&P financial was the only sector posting a slight gain of 0.1 percent.

Home Depot Inc slipped 1.7 percent after the No.1 US home improvement chain missed Wall Street forecasts for sales at established stores. Smaller rival Lowe’s was down 0.6 percent.

At 11:09 a.m. EDT the Dow Jones Industrial Average was down 198.21 points, or 0.80 percent, at 24,701.20, the S&P 500 was down 19.73 points, or 0.72 percent, at 2,710.40 and the Nasdaq Composite was down 71.11 points, or 0.96 percent, at 7,340.20.

Declining issues outnumbered advancers for a 2.02-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.18-to-1 ratio on the Nasdaq.

Europe

European shares inched up on Tuesday after a choppy session as higher Brent crude prices lifted oil stocks to their highest level since September 2014, offsetting a drop in telecoms.

The STOXX 600 index rose 0.1 percent, reversing weakness seen in morning trade after weak data from China and Germany added to a spate of less encouraging news on the global economy.

Shares in oil majors BP, Royal Dutch Shell, Total and Eni rose between 0.4 and 1.3 percent as oil prices hit multiyear highs on concerns about US sanctions on Iran, which are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

The oil and gas index is by far the best sectoral performer in Europe so far this year, up nearly 13 percent. Although crude oil prices retreated, the index rose 0.9 percent.

Strength in the financial sector also supported European equities with Raiffeisen and Commerzbank rising 4.6 and 3.9 percent respectively following strong earning updates.

The earnings season was nearing its close with more than three-quarters of MSCI Europe companies having reported first-quarter results.

Credit Agricole added to the optimism around banking stocks. The French bank’s shares had fallen at the open but recovered to trade up 1.2 percent after quarterly profit fell short of expectations.

Telecoms were the biggest sectoral weigh to the STOXX, falling 2 percent.

Vodafone fell 4.3 percent after the world’s second largest mobile operator said its boss was leaving.

Vodafone, which also announced its full-year results, said CEO Vittorio Colao, who spent 10 years reshaping the group into a digital communications powerhouse, would be replaced by its current finance director.

French satellite firm Eutelsat also tumbled 12 percent after warning it could fall short of its full-year revenue target.

Elsewhere, Iliad shares sank 19 percent to the bottom of the STOXX after a management reshuffle and weak firstquarter results.

Dealmaking, which has been rife in European markets this year, continued with Worldline agreeing to buy the payments arm of Swiss stock exchange operator SIX for $2.75 billion.

Shares in the French payments company jumped 2 percent, while Atos, which has a majority stake in Worldline, rose 1.9 percent.

Asia

Asian markets mostly fell on Tuesday as trade issues returned to the spotlight with China and the US holding more high-level talks this week, while oil prices held gains as tensions in the Middle East simmer.

A run-up in equities over the past week has also led to profit-taking, with Hong Kong hit after six straight days of gains.

Hong Kong closed 1.2 percent lower after racking up gains of more than five percent over the previous six sessions, while Tokyo ended 0.2 percent down.

Sydney shed 0.6 percent, Singapore fell 0.4 percent and Seoul sank 0.7 percent, with Wellington, Taipei, Bangkok and Jakarta also lower.

However, there were gains in Manila and Kuala Lumpur.

And Shanghai rose 0.6 percent as global index compiler MSCI said 234 mainland shares would be on a final list to be included in its flagship index from next month. The big-cap shares, from banking giant ICBC to oil major PetroChina, will account for 0.39 percent of the MSCI Emerging Markets Index.

But analysts said gains were capped as investors have already bought these shares in anticipation of the June inclusion.

Mumbai’s Sensex jumped 0.5 percent as Prime Minister Narendra Modi’s BJP looked on course to win a key state election just a year before national polls.

Key figures around 0810 GMT: Tokyo - Nikkei 225: DOWN 0.2 percent at 22,818.02 (close)

Hong Kong - Hang Seng: DOWN 1.2 percent at 31,152.03 (close)

Shanghai - Composite: UP 0.6 percent at 3,192.12 (close)

Dollar/yen: UP at 109.92 yen from 109.65 yen

Oil

Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned US sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

Brent crude oil reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014, before easing to $78.28, up 5 cents, by 1345 GMT.

US light crude was 15 cents lower at $70.81 a barrel, also not far off its highest since November 2014.

World oil prices have surged by more than 70 percent over the last year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russia.

Now the United States has announced it will impose sanctions on Iran over its nuclear programme, raising fears that markets will face shortages later this year when trade restrictions come into effect.

In China, the world’s biggest oil importer, refinery runs rose nearly 12 percent in April compared with a year earlier, to around 12.06 million barrels per day (bpd), marking the second-highest level on record on a daily basis, data showed.

The tightening market has all but eliminated a global supply overhang which depressed crude prices between late 2014 and early 2017.

Gold

Gold slid more than 1 percent on Tuesday, falling for a third day to hit its lowest this year as a rise in US borrowing costs pushed up the dollar and overshadowed the impact of strife in Gaza.

Downward momentum in gold picked up after the metal broke below support at its 200-day moving average at $1,306 an ounce. That had firmly underpinned prices earlier this month.

Spot gold was down 1.2 percent to $1,207.06 an ounce by 1304 GMT, having earlier hit its lowest since late December at $1,296.31. US gold futures for June delivery were down 1.6 percent to $1,296.90 an ounce.

Israeli troops shot dead dozens of Palestinian protesters on the Gaza border on Monday when the high-profile opening of the US embassy to Israel in Jerusalem by the Trump administration raised tension to boiling point.

But gold investors were fixated on the dollar, which rose versus a currency basket as 10-year US bond yields shot above 3 percent, sending borrowing costs higher in a number of other countries.