Stocks Rebound With Dollar and Gold Feels the Pain: Markets Wrap

(Bloomberg) -- The dollar gained and stocks rose, driving gold to its biggest drop in two months, as Congress took a holiday break from tax talks and markets absorbed political developments in the Americas and Europe.

At the start of a truncated Thanksgiving week, investors were unfazed by the news that Fed Chair Janet Yellen had tendered her resignation. The S&P 500 Index climbed after two down weeks, although it gave up some of the gains late in the session on reports that the U.S. is poised to sue to block AT&T Inc.’s proposed takeover of Time Warner Inc.

“Very near term, stocks face cross currents associated with year-end tax-related strategies as well as a potential postponement in tax reform legislation that could cause the pause in the rally to linger,” Bruce Bittles, chief investment strategist at Baird, said in a note Monday. “But any weakness that does develop is anticipated to be limited in both time and price.”

As the dollar gained, precious metals declined, with gold recording its biggest drop since September. Silver and platinum also fell. West Texas intermediate crude retreated after surging the most in two weeks in the previous trading session. 

Yellen submitted her resignation to President Donald Trump, effective upon the swearing in of her replacement, Jerome Powell. The Fed minutes are due out Wednesday, which will allow investors to gauge officials’ eagerness to boost the benchmark interest rate in December, a move widely expected by the market. Treasuries edged lower.

From a monetary policy perspective, the news of Yellen’s resignation “shouldn’t really affect anything,” Ernie Cecilia, the chief investment officer at Bryn Mawr Trust Co., said by phone. “If anything, Jerome Powell should be close to a continuation of the kind of monetary policy that Janet was doing. So I wouldn’t think there would be any kind of ripple on the monetary side.”

In Europe, a month of exploratory coalition talks in Germany ended in a dramatic collapse on a dispute over migration policy. The upshot is that the region’s dominant country remains hamstrung on the global stage, potentially affecting everything from policy toward the European Union, Turkey and Russia to government spending. Chancellor Angela Merkel said that she’s skeptical about forming a minority government and would prefer new elections if she can’t put together a majority.

Nevertheless, the Stoxx Europe 600 Index advanced and Germany’s DAX rebounded from a seven-week low, with investors judging that the talks’ failure won’t threaten the economy. The euro declined.

Pound and gilts traders will focus on a potential downgrade to the U.K. growth outlook this week and the government’s efforts toward agreeing on a Brexit “divorce” bill. Sterling was boosted on Monday by reports that the U.K. was preparing to make an enhanced divorce bill offer to the EU ahead of crucial talks starting next month.

Chilean stocks posted their worst rout in six years after surprise election results dashed expectations that billionaire Sebastian Pinera would easily win next month’s presidential run-off. The IPSA index dropped 5.9 percent, its worst performance since August 2011.

Terminal users can read more in our Markets Live blog.

Here are some key events coming up this week:

• Minutes from the Reserve Bank of Australia’s November meeting are due Tuesday, while those from the European Central Bank’s October meeting due out on Thursday could show dissent in the discussion about tapering.
• Federal Reserve Chair Janet Yellen gives a talk at New York University.
• Reports on sales of previously owned homes and durable goods orders for October are due in the U.S.
• The minutes from the Fed’s latest policy meeting are out on Wednesday.
• On Tuesday, Taiwan updates on October unemployment and Hong Kong’s October CPI is out. Singapore 3Q GDP is due on Thursday. New Zealand October trade and South Korea November consumer confidence are due later in the week.
• The U.K. announces its budget Wednesday.
• Argentina, Hungary, Kenya, Nigeria and South Africa set monetary policy this week.

These are the main moves in markets:

Stocks

• The S&P 500 Index increased 0.13 percent at 4:03 p.m. New York time.
• The Stoxx Europe 600 Index jumped 0.7 percent to 386.39.
• The U.K.’s FTSE 100 Index increased 0.1 percent.
• Germany’s DAX Index jumped 0.5 percent.

Currencies

• The Bloomberg Dollar Spot Index climbed 0.4 percent , the first gain in a week.
• The euro dipped 0.5 percent to $1.173.
• The British pound climbed 0.2 percent to $1.3235, the strongest in almost three weeks.
• The Japanese yen declined 0.5 percent to 112.62 per dollar.

Bonds

• The yield on 10-year Treasuries rose two basis points to 2.36 percent.
• Germany’s 10-year yield gained less than one basis point to 0.36 percent, the lowest in more than a week.
• Britain’s 10-year yield fell less than one basis point to 1.292 percent.

Commodities

• West Texas Intermediate crude fell 0.8 percent to $56.09 a barrel.
• Gold sank 1.2 percent to $1,277.33 an ounce.
• Copper gained 0.8 percent to $6,828 a ton.

--With assistance from Netty Ismail Adam Haigh and Cormac Mullen

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net, Julie Verhage in New York at jverhage2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn

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