Wednesday, 12 December, 2018

Dollar claws back some of its losses ahead of jobs data

Reuters Reuters
Nellie Chapman | 03 February, 2018, 23:06

A weeklong rise in 10-year Treasury note yield above 2.84% on Friday after an upbeat jobs report stoked fears of rate hikes and rising inflation, helped propel yields higher.

The Toronto Stock Exchange's S&P/TSX composite index ended down 90.75 points, or 0.57 per cent, at 15,860.92, its lowest close since October 25.

Adding to the pressure were disappointing earnings reports from major companies.

US hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economy's steady move toward full employment extended into 2018.

"People are finally starting to reprice reflation, it's about time", Jeanne Asseraf-Bitton, head of global cross-asset research at Lyxor Asset Management, said by phone. The level is seen by many stock-watchers as a potential trigger for a correction in equities. The figures point to an economy on strong footing even in its ninth year of expansion, fueled by global economic growth and healthy consumer spending at home.

Banks, which benefit from higher interest rates, led the S&P 500 financials to a 1-per cent gain, with Goldman Sachs helping to push the Dow into positive territory. The yield on 10-year Treasury notes, the benchmark for interest rates, has risen swiftly, stoking investor concerns that higher rates could weigh on company earnings and equity prices. The rise in bond yields is good, it's just the speed at which it's happening that is making investors nervous. At 10:44 a.m. ET (1544 GMT), the Dow Jones Industrial Average was down 50.26 points, or 0.19 percent, at 26,099.13, the S&P 500 was down 2.77 points, or 0.09 percent, at 2,821.04. The Nasdaq and S&P 500 Index weren't saved from the sell-off, either, with all three indexes suffering their worst weekly losses in two years. Another report showed USA factory activity slowed in January amid a fall in new orders.

The pan-European FTSEurofirst 300 index of leading regional shares lost 0.98pc and the STOXX 600 index tumbled 1.07pc. Germany's DAX Index sank 1.7%, the most since June. It closed a four-month low.

Topix index fell 0.3 percent, Hong Kong's Hang Seng Index dropped 0.1 percent, the Kospi index declined 1.7 percent, Australia's S&P/ASX 200 Index rose 0.5 percent.

The Bloomberg Dollar Spot Index gained 0.8 percent, the largest rise in more than 10 weeks.

The Toronto Stock Exchange's S&P/TSX composite index fell 225.24 points, or 1.4 per cent, to 15,635.68.

The dollar index, tracking the unit against a basket of major currencies, rose 0.72 per cent, with the euro down 0.64 per cent to $1.2428. It touched 2.8525 earlier.

The S&P and the Dow were headed for their worst week in two years on Friday, as robust data pushed up bond yields further and boosted chances of more interest rate hikes this year.

The 10-year yield narrowly missed its ninth increase out of the past 11 trading sessions.

Gold prices also took a roughly 1% weekly loss.

U.S. West Texas Intermediate (WTI) crude CLc1 settled down 35 cents to $65.45 a barrel.

Among the most active Canadian stocks by volume were Canopy and Aphria; Bombardier Inc, down 2.3 percent at C$ 3.40; and Ivanhoe Mines, losing 3.1 percent to C$3.41.