U.S. Stocks Set to Open Lower as Global Rally Pauses
20 February 2018 - 11:17AM
Dow Jones News
By David Hodari and Kenan Machado
-- Bond yields continue to climb
-- U.S. markets set to echo Asia selling
-- Industrial goods boost European stocks
Global stocks were on course to extend their early-week losses
on Tuesday, with the volatility of recent weeks set to continue as
U.S. investors returned from the holiday weekend.
The Stoxx Europe 600 edged down 0.1%, with the European banking
sector down 0.8%. HSBC was down 4.1% after the bank's results
undershot the expectations of analysts.
U.S. indexes, meanwhile, were set to relinquish some of last
week's gains with both the S&P 500 and Dow Jones Industrial
Average futures last down 0.8%. Such a move would echo weak trading
in Asia-Pacific, where indexes gave up some of their early-week
gains amid reduced holiday trading.
Wild swings in equities over recent weeks indicates that "what
we're currently seeing is a regime shift and the pain of [monetary
policy] normalization which does bring some volatility," said
Christian Keller, head of economics research at Barclays. "Overall,
we're facing a new situation: central banks -- like the [Federal
Reserve] -- are tightening more confidently or preparing to do so,
in the case of the [European Central Bank]. That's a different
theme to what we've seen over the past few years."
Yields on 10-year German government bonds rose to 0.754% from
0.733% late Monday, although banking stocks -- which would normally
benefit from such a move -- slipped from Monday's gains. Bond
yields move inversely to prices.
Last week's rally saw the Stoxx Europe 600 enjoy its largest
on-the-week climb since late 2016, while the S&P 500's weekly
increase was its largest since 2013. However, the Stoxx 600 is
still down 4.3% so far in February, and the S&P 500 is down
3.9%.
Yields on 10-year German government bonds rose to 0.748% from
0.733% late Monday, although banking stocks -- which would normally
benefit from such a move -- slipped from Monday's gains. Bond
yields move inversely to prices.
In a similar move, U.S. 10-year Treasurys were up to 2.916% from
last week's closing level of 2.877%, a four-year high at the
time.
That bond market optimism was noteworthy after a tumultuous few
weeks for stock markets, in a signal that fears about inflation,
rather than growth, have underpinned recent turbulence.
Rising inflation in the U.S. and Europe has prompted investors
to second-guess central bank guidance amid speculation that those
institutions will end the accommodative policies which have
supported equity markets in recent years, said Larry Hatheway,
chief economist at GAM Investments in a note.
While European stocks were higher, Japan's Nikkei closed 1%
down, giving up some of its early-week rise thanks to weakness in
its electronics and banking sectors. Selling came despite a slip in
the yen versus the dollar, with the greenback up 0.3% at
Yen107.0720.
South Korea's Kospi fell 1.1%, dragged lower by index
heavyweight Samsung Electronics, which dropped 2% after falling
1.3% on Monday. That followed a near-10% climb last week.
The Hang Seng Index pared an early slide on its first full day
of trading in nearly a week. The main benchmarks in Singapore and
New Zealand both 0.3%.
With Chinese and Taiwanese markets still closed for the Lunar
New Year holiday, investors should be cautioned against reading too
much into recent price action due to thin volumes.
Brent crude oil futures fell 0.7% but remained up so far this
week, while aluminum escaped metals-sector selling in the metals
sector in the wake of comments from the Trump administration late
last week that it was considering imposing import tariffs.
Write to David Hodari at David.Hodari@dowjones.com and Kenan
Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
February 20, 2018 06:02 ET (11:02 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.