U.S. stocks fell as selling in large-cap technology shares intensified, while Treasuries advanced with gold after North Korea ratcheted up tensions with America.
The Nasdaq 100 Index posted its steepest loss in five weeks, with the FANG cohort of megacaps leading declines. Small-cap shares fared better as investors continued to rotate into the year’s laggards. Haven assets advanced after North Korean Foreign Minister Ri Yong-Ho described President Donald Trump’s recent comments as tantamount to a declaration of war.
“Without a doubt, North Korea is hovering over the market, but it sort of zigs and zags onto the scene,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “What you are seeing is those tech names pulling back. The fact is that right now, you have a fully valued market and little catalysts at this point to push the market higher. ”
Ri, speaking in New York Monday, also declared that North Korea can shoot down U.S. warplanes as part of its right to self-defense under the United Nations charter, adding to weeks of rhetoric that has intermittently rattled financial markets. U.S. markets also kept an eye on the latest domestic political developments, with the most recent effort to overhaul the health-care system on life support and a Republican tax proposal still lacking details.
Elections dominated trading overseas. The Stoxx Europe 600 Index climbed, and the euro weakened after Chancellor Angela Merkel won Germany’s election, while the country’s main far-right party had a surprisingly strong result. The process of building a new government could take weeks, so markets may well move on from the result quickly.
“Investors were expecting a victory for Angela Merkel, but there has been a surprise in the relatively poor performance of the CDU and SPD, who suffered their worst results since 1949,” Nick Peters, multi asset portfolio manager at Fidelity International, wrote in a note.
The yen stayed weaker as Japan’s prime minister unveiled a fresh stimulus package and said he’ll dissolve the lower house of parliament ahead of a general election. Most government bonds advanced.
Terminal subscribers can read more in our Markets Live blog.
What to watch out for this week:
- Fed Chair Janet Yellen speaks in Cleveland on Tuesday. Later in the week, Bank of England Governor Mark Carney speaks, as does soon-to-depart Fed Vice Chairman Stanley Fischer.
- European Union chief Brexit negotiator Michel Barnier and U.K. counterpart David Davis begin their next round of negotiations.
- Household spending last month in the U.S. probably posted the smallest gain since February as motor-vehicle sales shifted into a lower gear, economists forecast government figures to show.
- The euro-area inflation rate may have accelerated a touch to 1.6 percent in September from 1.5 percent but the core will probably remain at 1.2 percent on Friday.
Here are the main moves in markets:
- The S&P 500 Index fell 0.2 percent to 2,496.66, the Nasdaq Composite Index lost 0.9 percent, the Dow Jones Industrial Average slid 0.2 percent and the Russell 2000 gained less than 0.1 percent after rising to a record high earlier in the session.
- Stoxx Europe 600 climbed 0.2 percent to the highest since July.
- The MSCI All-Country World Index declined 0.4 percent to the lowest in two weeks.
- The Bloomberg Dollar Spot Index climbed 0.4 percent to the highest in more than three weeks.
- The euro dipped 0.9 percent to $1.1847, the weakest in a month.
- The British pound slipped 0.3 percent to $1.3466.
- The yield on 10-year Treasuries dropped three basis points to 2.2198 percent.
- Germany’s 10-year yield declined five basis points to 0.399 percent.
- Britain’s 10-year yield fell two basis points to 1.334 percent.
- Gold jumped 1 percent to $1,310.25 an ounce.
- West Texas Intermediate crude rose 3 percent to $52.18 a barrel, the highest since April.
- Japan’s Topix index advanced 0.5 percent at the close in Tokyo. Australia’s S&P/ASX 200 Index ended virtually unchanged and South Korea’s Kospi index slid 0.4 percent.
- The Hang Seng Index in Hong Kong fell 1.4 percent with Chinese property developers slumping after several cities on the mainland tightened rules on home sales.
- The Japanese yen fell 0.2 percent to 112.22 per dollar.
Read more: www.bloomberg.com