U.S. Stocks Fall With Dollar as Treasuries Rise: Markets Wrap

(Bloomberg) -- U.S. stocks fell a second day, the dollar weakened to an eight-month low and Treasuries advanced as caution prevailed before testimony Thursday from former FBI Director James Comey, the ECB’s policy decision and the U.K. election.

The S&P 500 Index fell the most since mid-May as consumer and industrial shares slumped. Equities briefly pared declines on reports Comey would stop short of saying the president sought to obstruct justice. Europe’s equity benchmark slid the most in a week. Gold headed for a seven-month high and the yen rose to the strongest since April, while 10-year Treasury yields fell to the lowest since November.

Thursday is shaping up to be a pivotal day for capital markets as Comey’s testimony may give clues on how politically effective the Trump administration will be in refocusing attention on its policy agenda. Investors had already taken a defensive stance this week following a diplomatic spat among energy producing nations in the Middle East and the weekend’s terror attack in London.

“There is not much scheduled today that could potentially inspire the markets as the main focus this week is on ‘Super Thursday,”’ Piotr Matys, a London-based currency strategist at Rabobank, wrote in a client note. “Essentially, we brace for a volatile session on Thursday and Friday as at least one of those crucial events could trigger sharp moves in the markets.”

Read our Markets Live blog here.

Here are details on some of the important coming events:

• The European Central Bank’s policy decision probably won’t surprise, but the bank may drop the reference to “downside” risks to growth, while reiterating a weak inflation outlook. As a bonus, you get Mario Draghi speaking afterwards.
• Will she, won’t she? Voters will decide on Thursday whether U.K. Prime Minister Theresa May will extend her majority. Or lose it completely.
• Comey’s testimony will be parsed for clues to how the probe into the Trump campaign’s contact with Russian officials could impact the administration.

Here are the main moves in markets:

Stocks

• The S&P 500 Index dropped 0.3 percent to 2,429.34 as of 4 p.m. in New York.
• The Stoxx Europe 600 Index declined 0.7 percent. Swiss pharmaceutical company Roche Holding AG slid after one of its drug studies disappointed.
• Emerging-market shares lost 0.2 percent. Qatari stocks fell another 1.6 percent after plunging the most since 2009 on Monday when Saudi Arabia and three other Arab countries severed most diplomatic and economic ties to the country.

Currencies

• The yen rose 1 percent to 109.409 per dollar, the strongest level since April 21 on a closing basis.
• The Bloomberg Dollar Spot Index fell 0.3 percent and was trading at the lowest since October.
• The euro strengthened 0.2 percent to $1.1277 and the British pound was unchanged at $1.2904.
• South Africa’s rand weakened 0.9 percent after a report showed the economy contracted for a second successive quarter in the first three months of the year.

Commodities

• Gold climbed futures added 1.2 percent to end at $1,297.50 an ounce, advancing for a third day to the highest since Nov. 9. The sagging dollar and concern over U.K. elections boosted demand for the metal as store of value.
• WTI crude climbed 1.7 percent to settle at $48.19 a barrel in New York. The gains came as U.S. crude stockpiles are seen falling for a ninth week, ahead of the release of industry-funded data on inventories.
• Copper declined as hedge funds pulled back amid concerns about slowing global demand for the metal used in pipes and wires.

Bonds

• The yield on 10-year Treasuries declined four basis points to 2.14 percent, after climbing two basis points in the previous session.
• Ten-year yields in France fell five basis points to 0.669. Similar maturity U.K. bond yields lost six basis points.

--With assistance from Adam Haigh Dennis Pettit Jessica Summers Samuel Potter and Thomas Biesheuvel

To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.