The dollar slid to an 11-month low and U.S. stocks clawed back earlier losses to reach record levels, as President Donald Trump’s economic revitalization agenda once again faltered. European shares dropped amid earnings disappointments, and gold rose to the highest level this month.
The greenback lost ground against all but one of its G-10 peers on signs Trump’s health-care reform bill is effectively dead in its current form, after two more Republican senators announced their opposition to the plan. Sterling bucked the trend, slipping against the dollar as U.K. inflation unexpectedly slowed in June, while the euro surged ahead of this week’s ECB meeting.
The S&P 500 Index rose slightly to reach an all-time high, while the Nasdaq Composite Index also climbed to a record close. The Stoxx Europe 600 Index fell following a grim earnings report from Ericsson AB. Iron ore futures hit their highest since May on strong demand from Chinese steel mills.
While many traders had already dialed back their expectations Trump will be able to execute his pro-growth policies, the apparent death of the health-care bill lent a risk-off tone to markets. Some notable investors have become less sanguine as global equities continue to trade near record highs.
“Any hopes of dollar support from a successful vote on the Senate’s health-care bill look to be vanishing,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Near term, the dollar path of least resistance is down. We still think the data — inflation in particular — will provide the Fed with enough ammunition to hike in December and boost the dollar, but this is a fourth-quarter story.”
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Here are some key upcoming events:
- The European Central Bank meets Thursday. Bloomberg Intelligence expects no change then, and no rate hike before 2019. Reuters cited unidentified officials as saying the bank is keen to keep asset purchases open-ended.
- The Bank of Japan is forecast to stand pat at its meeting Thursday.
- Round two of Brexit talks is underway in Brussels.
Here are the main moves in markets:
Currencies and Bonds
- The Bloomberg Dollar Spot Index sank 0.5 percent to its weakest level since Aug. 19.
- The euro jumped 0.7 percent to $1.1556 amid the greenback weakness and speculation that the European Central Bank could signal its intent to scale back monetary stimulus at its meeting on Thursday.
- The pound weakened 0.1 percent to $1.3044 after U.K. inflation unexpectedly fell in June.
- The yield on 10-year U.S. Treasuries dropped six basis points to 2.26 percent after dropping five basis points last week.
- The S&P 500 rose less than 0.1 percent to a record 2,460.61, reversing a loss of 0.4 percent earlier in the session. The Dow Jones Industrial Average declined 0.3 percent. The Nasdaq Composite Index gained 0.5 percent to reach an all-time high.
- Europe’s Stoxx 600 Index dropped 1.1 percent as miners reversed Monday’s gains and Ericsson slumped.
- Gold climbed 0.6 percent to $1,241.99 an ounce.
- WTI crude jumped 1 percent to $46.48, erasing early losses.
- Iron-ore futures surged 3 percent, extending a roughly 7 percent gain for the week.
- The Topix Index dropped 0.3 percent. It fell as much as 0.9 percent earlier after some officials at the Bank of Japan were reported to be increasingly concerned about the sustainability of its purchases of exchange-traded funds. More on that story here.
- Australia’s S&P/ASX 200 Index slid 1.2 percent. The Shanghai Composite Index and other mainland China markets erased losses and rose.
- The Australian dollar returned to a two-year high after central bank minutes signaled optimism on economic growth and wages.
Read more: www.bloomberg.com