U.S. Stocks Drop Most in 3 Weeks: Markets Wrap

(Bloomberg) -- U.S. stocks fell the most in three weeks as tepid earnings raised new doubts about the strength of the American consumer. Treasuries rose with gold on haven demand, while oil added to gains.

The S&P 500 Index slumped from an all-time high as Macy’s Inc.’s results disappointed, adding to concerns that the U.S. consumer continues to hold back on spending. Canadian equities fell after Moody’s Investors Service cut ratings on six of the nation’s largest banks amid housing woes. The Stoxx Europe 600 Index declined even after the European Commission boosted growth forecasts. The pound retreated after Bank of England warned U.K. households will have a difficult year. Oil added to the biggest advance this year as stockpiles fell by more than forecast.

While company earnings and economic data are painting a picture of robust global growth and political risk has eased following France’s presidential election, investors are showing a lack of conviction as global equities trade at record-high levels and volatility evaporates. The path for interest rates will remain a major focus amid growing bets for a Fed increase in June and talk of tapering by the European Central Bank. The BoE said on Thursday it may need to raise interest rates faster than the market suggests, assuming that Brexit goes well.

“Investors are trying to make sense of contradictory forces,” said Ben Kumar, a London-based investment manager at Seven Investment Management, which oversees about 10 billion pounds ($13 billion). “Everyone’s quite optimistic and companies are making lots of money and this is all good stuff, and they start thinking about Mario Draghi and the taper and how much that will hurt.”

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Here are the key events this week:

• U.S. April retail and CPI figures are on Friday.
• March industrial production data the same day could prompt a revision to the first reading of euro-area GDP growth. Germany’s preliminary growth figure for the first quarter is also Friday.

And here are the main moves:

Stocks

• The S&P 500 slipped 0.6 percent at 10:12 a.m. in New York, after the underlying gauge rose 0.1 percent Wednesday to an all-time high.
• The S&P/TSX Composite Index slid 0.3 percent, with banks in the measure leading declines.
• The Stoxx Europe 600 fell 0.5 percent, after gaining 0.2 percent Wednesday to the highest level since August 2015. 

Currencies 

• The euro fell 0.2 percent to $1.0845 as the Bloomberg Dollar Spot Index added 0.1 percent. Sterling lost 0.6 percent.
• The kiwi fell 1.5 percent to 68.35 U.S. cents. The Reserve Bank of New Zealand kept its benchmark rate unchanged and said it will keep rates there for an extended period in expectation that inflation will slow.
• The Canadian dollar dropped 0.7 percent after Moody’s Investors Service downgraded six Canadian banks.

Bonds

• The yield on 10-year Treasury notes fell one basis points to 2.40 percent after rising for the past three sessions.
• German benchmark yields rose two basis points to 0.44 percent.

Commodities

• West Texas oil rose 0.9 percent to $47.75 a barrel after jumping more than 3 percent Wednesday.
• Gold added 0.1 percent to $1,220.88 following the longest losing streak since October. 
• Iron ore on SGX AsiaClear in Singapore fell as much as 4.5 percent to $59 a ton, the lowest since October amid a clampdown on leverage in China, the top consumer, and expanding global supply.

Asia

• Asian equity markets climbed to multi-year highs, with South Korea reaching a fresh record while the Nikkei 225 Stock Average approached the 20,000 level. Chinese shares erased earlier losses.
• The kiwi fell as much as 1.8 percent after New Zealand’s central bank chief downplayed rising price expectations.

--With assistance from Jake Ulick Eddie van der Walt and Adam Haigh

To contact the reporters on this story: Samuel Potter in Dubai at spotter33@bloomberg.net, Cecile Gutscher in London at cgutscher@bloomberg.net.

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, V. Ramakrishnan