Dollar Retreats as Treasuries Jump With Gold: Markets Wrap

(Bloomberg) -- The dollar fell and Treasuries rallied with gold as asset moves sparked by Donald Trump’s election showed signs of faltering ahead of Friday’s U.S. jobs report.

The greenback weakened a second day after reaching a 14-year high, as China moved to stem capital outflows and investors reconsidered Federal Reserve rate intentions. U.S. stocks recovered from session lows to end little changed, as defensive shares that’ve been battered during the post-election rally led gains. The yield on 10-year Treasury notes slid below its level prior to the Fed’s December rate increase, while emerging-market shares erased post-election losses. The offshore yuan surged and gold reached a four-week high.

While the stock rally and Treasury rout that greeted Trump’s win have been under threat for the past month, the dollar’s tumble Thursday came amid concern over whether economic growth can accelerate in the face of higher interest rates and a strong greenback. Friday’s jobs report is expected to confirm a sixth straight year of adding more than 2 million jobs, a pace that could be difficult to sustain.

The catalysts for Thursday’s moves started a day earlier, when a record of Fed deliberations in December signaled central bankers remain committed to gradual rate hikes. China’s move in the funding market added momentum in the dollar selloff, which made riskier assets in emerging markets more attractive. The drop in Treasury rates sent bank shares lower by the most since September, and results from major retailers raised concern about the strength of the American consumer.

Stocks

• The S&P 500 Index fell 0.1 percent to 2,269 at 4 p.m. in New York, 0.1 percent below its record set on Dec. 13. The index slipped as much as 0.5 percent earlier. Real-estate and consumer-staple shares paced gains.
• Financial shares sank 1 percent as the drop in rates posed a threat to lending profits.
• Kohl’s Corp. plunged 19 percent, Macy’s Inc. lost 14 percent and L Brands Inc. fell 7.9 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.
• The MSCI Emerging Markets Index rallied 1.3 percent to the highest since Nov. 8.

Currencies

• The Bloomberg Dollar Spot Index fell 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.
• Mexico’s peso climbed as much as 1.5 percent after Banxico confirmed that it was selling dollars to bolster the exchange-rate from a record low. The peso erased the advance after Trump threatened Toyota Motor Corp. with a border tax for planning to build a factory in Mexico.
• The offshore yuan surged 0.5 percent after advancing 1.4 percent Wednesday.
• The euro gained 1.1 percent to $1.0604 and the yen added 1.6 percent to 115.35.
• Russia’s ruble advanced 1.6 percent, one of the top two performers among 31 major world currencies after sliding below 60 per dollar for the first time since July 2015.

Commodities

• Crude climbed 0.7 percent to $53.52 a barrel in New York, after earlier erasing gains when a government report showed U.S. fuel stockpiles surged last week. A report that Saudi Arabia is cutting production as it implements an agreement to ease a global supply glut sparked the turnaround.
• Gold rose 1.5 percent to the the highest level in almost a month at $1,181 an ounce.
• Silver and platinum also rose in the spot market.
• Palladium slipped after rallying 11 percent in the previous four sessions.

Bonds

• U.S. Treasuries rallied the most since the post-Brexit jolt, with the yield on the 10-year benchmark falling eight basis points to 2.36 percent. That would be the biggest drop since June 27.
• Peripheral bonds in Europe weaken, with 10-year yields rising by more than four basis points in Portugal, Italy and Spain; most other developed-market debt rallies.

--With assistance from Netty Ismail Eddie van der Walt David Goodman Andreea Papuc Natasha Doff and Cecile Gutscher To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net. To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Jeremy Herron, Stephen Kirkland