Dollar Routed, Stocks Drop as Bonds Jump With Gold: Markets Wrap – Bloomberg

By Jeremy Herron
  • Greenback sinks most in six months, 10-year yields tumble
  • China intervention sparks retreat ahead of U.S. jobs report
 
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What’s Driving the Dollar Lower?

The dollar tumbled the most in six months, U.S. stocks retreated and Treasuries rallied with gold amid Chinese efforts to stem capital outflows and a rethinking of Federal Reserve rate intentions. Emerging-market assets surged.

The greenback weakened a second day after reaching a 14-year high, as a record of Fed deliberations signaled central bankers remain committed to gradual rate hikes amid concern dollar strength could slow growth. The yield on 10-year Treasury notes slid below its level prior to the Fed meeting. U.S. stocks fell as banks sank the most since September and results from major retailers raised concern about the American consumer before Friday’s jobs report. The offshore yuan surged the most on record. 

The growing backlash against the dollar coincides with more sober outlooks on whether President-elect Donald Trump’s plans to boost government spending will boost growth. The Fed reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate, damping speculation officials will step in to counter inflation with higher rates. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election.Stocks

  • The S&P 500 Index fell 0.4 percent to 2,261.64 at 11:48 a.m. in New York, after closing Wednesday within a point of an all-time high.
  • Financial shares sank 1.8 percent as the drop in rates posed a threat to lending profits.
  • Kohl’s Corp. plunged 18 percent, Macy’s Inc. lost 13 percent and L Brands Inc. fell 8 percent to pace declines after the retailers reported disappointing holiday results.
  • The Stoxx Europe 600 Index edged higher after falling 0.1 percent Wednesday to halt a three-day advance that took the measure into a bull market.

Currencies

  • The Bloomberg Dollar Spot Index fell 1.1 percent in its biggest slide since July on a closing basis. Companies added fewer jobs than forecast in December, according to a private research group.
  • The offshore yuan surged 0.5 percent after advancing 1.4 percent Wednesday.
  • The euro gained 0.2 percent to $1.0513.
  • Russia’s ruble advanced 1.5 percent, one of the top two performers among 31 major world currencies after breaching 60 per dollar for the first time since July 2015.
  • Mexico’s peso erased losses after the central bank sold dollars to bolster its currency.

Commodities

  • Crude fell 0.5 percent to $53 a barrel in New York, erasing gains after a government report showed U.S. fuel stockpiles surged last week.
  • Gold rose 1.5 percent to the the highest level in almost a month at $1,183 an ounce.

Bonds

  • U.S. Treasuries rallied, with the yield on the 10-year benchmark falling eight basis points to 2.36 percent.
  • Spanish bonds declined, and French bonds erased gains, after the nations sold bonds.