US stocks, dollar fall amid IMF cut, oil rises

(iStock)
(iStock)

Dubai - The dollar fell and US stocks slumped as a note of caution spread through financial markets, underscored by an IMF downgrade to its American growth forecast. Treasuries retreated and crude pushed toward $44 a barrel.

Treasury 10-year yields rose after the International Monetary Fund cut its US growth outlook this year hours before Federal Reserve chair Janet Yellen speaks on the economy.

The selloff in technology shares resumed, with Alphabet slumping after the European Union hit its Google unit with a $2.7bn antitrust  fine. The euro jumped and bonds fell after Mario Draghi said headwinds to inflation in the region are temporary.

Traders will be looking to Yellen for clues on the outlook for interest rates and the American economy, especially after weakness in data yesterday added to concerns about the strength of growth. Some investors worry the Fed is taking too rosy a view as it sets the path for increasing borrowing costs.

European Central Bank President Draghi struck a cautiously optimistic tone for the euro area, noting a “strengthening and broadening recovery” but stressing the need for prudence in adjusting policy.

Meanwhile, Brazilian President Michel Temer was charged with corruption in a highly anticipated development that may put the embattled leader of Latin America’s largest economy on trial. Temer, who has denied the charges, could lose his job if indicted and found guilty.

India and Singapore reopened after holidays but many markets, including in Malaysia, Indonesia and most of the Middle East remain closed.

Here are some important upcoming events:

The inaugural session of the new French parliament will start today. The Federal Reserve is set to announce the results of the second part of its annual US bank stress test on Wednesday. China’s PMI might have declined in June after unexpectedly remaining unchanged in May, reflecting government offers to cut overcapacity and leverage. That reading is due on Friday.

Also due this week: Japanese inflation, factory output, unemployment, household consumption and housing starts; rate decisions in Colombia, the Czech Republic and Armenia.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 0.1% to 2 436.96 at 16:21. It’s on pace for a gain of 1% in June and more than 3% in the second quarter. The Nasdaq 100 lost 0.5%. The Stoxx Europe 600 Index dropped 0.7%, as declines in travel and leisure shares overshadowed the rally in miners.

Currencies

The euro surged 0.9% to $1.1286. The Bloomberg Dollar Spot Index fell 0.4% after gaining 0.1% in the previous session. The British pound added 0.3% to $1.2766. 

Commodities

West Texas Intermediate crude rose 0.9% to $43.75 a barrel, adding to a three-day rally following oil’s drop into a bear market. Gold futures increased 0.3% to $1 250.30 an ounce. The precious metal sank almost 1% on Monday.

Bonds

The yield on 10-year Treasuries rose three basis points to 2.17%, after dropping less than one basis point on Monday.

European government bonds dropped across the board, with the yield on benchmark French bonds climbing eight basis points and that of Germany seven basis points.

Asia

The Chinese yuan jumped both onshore and overseas amid speculation of central bank intervention. Hong Kong’s Hang Seng index fell 0.1% and the Shanghai Composite Index advanced 0.2%.

A string of small-cap Hong Kong stocks suddenly plunged during the day, with traders pointing to links between some of the companies and a brokerage that’s under regulatory investigation. Japan’s Topix climbed 0.4% to the highest closing level since August 2015.

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.98
(-0.23)
ZAR/GBP
21.23
(-0.06)
ZAR/EUR
19.15
(-0.17)
ZAR/AUD
11.80
(-0.12)
ZAR/JPY
0.16
(-0.25)
Gold
1774.31
(+0.03)
Silver
18.02
(-0.04)
Platinum
808.00
(+0.25)
Brent Crude
42.78
(-0.79)
Palladium
1914.01
(+0.62)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
17% - 1609 votes
I am taking a hit, but should be able to recover in the next year
23% - 2116 votes
My finances have been devastated
35% - 3173 votes
It's still too early to know what the full effect will be
25% - 2297 votes
Vote