U.S. Stocks Mixed, Bonds Pare Gain as Angst Eases: Markets Wrap

(Bloomberg) -- U.S. stocks ended little changed, while Treasuries pared gains as American government officials tried to ease concerns the country was headed for armed conflict with North Korea. Crude fell on a jump in gasoline stockpiles.

The S&P 500 Index almost erased losses in the final hour of trading and the CBOE Volatility Index pared an advance as Secretary of State Rex Tillerson signaled military confrontation was not imminent. He was one of several officials in the Trump administration who sought to fine-tune the message on how it will address North Korean threats. 

Trump’s statement Tuesday that could unleash “fire and fury” against Kim Jong Un’s regime sparked demand for haven assets from the yen to Treasuries. Those trades began reversing late Wednesday as investors grew more confident the situation wouldn’t escalate. Still, emerging-market shares fell the most since June and gold jumped to an eight-week high Wednesday. The 10-year Treasury yield fell as much as five basis points before trimming that to a single point.

“Trump in his reactions is something new for all of us,” Geraldine Sundstrom, portfolio manager at Pimco Europe, said in an interview on Bloomberg TV. “Given the nature of the threats, given the players are new, it makes the situation a little bit unusual,” said Sundstrom, who recommended safe haven trades and minimizing risks through duration. 

Terminal users can read more in our Markets Live blog.

Among the key events looming this week:

• U.K. factory output for June is due Thursday, with industrial production for France on Friday.
• This week’s Federal Reserve speakers aren’t done: keep a keen ear out for comments by New York Fed boss Bill Dudley on Thursday.
• Argentina, Mexico, New Zealand, Peru, the Philippines, Serbia and Zambia set monetary policy.

Here are the main moves in markets:

Stocks

• The S&P 500 Index lost less than 0.1 percent to 2,474.01 at 4 p.m. in New York, all but erasing losses that reached 0.5 percent.
• The CBOE Volatility Index 3 percent, well off its session high of a 15 percent spike.
• The Stoxx Europe 600 Index declined 0.7 percent.
• The MSCI All-Country World Index sank 0.4 percent.
• The MSCI Emerging Market Index sank 1 percent, the biggest dip in almost eight weeks.

Currencies

• The euro added less than 0.1 percent to $1.1757, the weakest in almost two weeks.
• The Bloomberg Dollar Spot Index was little changed.
• The British pound increased 0.1 percent to $1.3001, the first advance in a week.
• South Africa’s rand sank 0.6 percent to 13.455 per dollar, the weakest in more than four weeks.

Bonds

• The yield on 10-year Treasuries dipped two basis points to 2.24 percent.
• Germany’s 10-year yield declined five basis points to 0.428 percent, the lowest in six weeks.
• Britain’s 10-year yield fell five basis points to 1.109 percent, the lowest in six weeks.
• France’s 10-year yield decreased four basis points to 0.714 percent, the lowest in six weeks.

Commodities

• Gold surged 1.3 percent to $1,279.64 an ounce, the biggest jump in two months.
• West Texas Intermediate crude climbed 0.2 percent to $49.26 a barrel.

Asia

• Japan’s Topix index fell 1.1 percent, the most since May 18. Australia’s S&P/ASX 200 Index bucked the region-wide downward trend to add 0.4 percent. The Hang Seng Index in Hong Kong lost 0.4 percent and China’s Shanghai Composite Index was down 0.2 percent.
• The Japanese yen advanced 0.6 percent to 109.70 per dollar, the strongest in eight weeks.

--With assistance from Min Jeong Lee Adam Haigh and Samuel Potter

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

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