U.S. Stocks Sputter as Crude Slumps; Pound Surges: Markets Wrap

(Bloomberg) -- U.S. stocks finished the session lower as a surge in optimism over trade talks with China was offset by a plunge in crude prices. The pound rallied on reports of advancement toward a Brexit deal.

The S&P 500 ended Tuesday well off the day’s highs as West Texas crude hit a nine-month low, falling the most since 2011, after U.S. President Donald Trump criticized Saudi Arabia’s plan to cut output. The Dow Jones Industrial Average slid as Exxon Mobil and Chevron dropped. Treasuries climbed and the dollar fell from an 18-month high.

Stock indexes spent the morning on an upswing after White House economic adviser Larry Kudlow told CNBC that the U.S. and China are talking on “all levels” of government. That followed an overnight report that China’s Vice Premier Liu He will pave the way for a meeting between the leaders of the two biggest economies later this month. Caterpillar, 3M and megacap technology shares that react to trade headlines paced those gains in major equity benchmarks.

“What I think is going on in the market is a bit of a consolidation of the activity that took place yesterday. It’s a little bit of a repositioning of people’s portfolios,” said Steve Ricchiuto, chief U.S. economist at Mizuho Americas. “It’s reflected in very little price change and thin market behavior, a market where you’re seeing a rotation within asset classes.”

Britain’s pound surged after three days of losses as the U.K. and the European Union agreed on a draft Brexit divorce deal. Trade worries and Brexit negotiations have hung over markets for months, clouding the economic outlook and helping compound an ongoing sell-off in equities. While comments from Chinese Premier Li Keqiang in Singapore Tuesday hinted at a more optimistic outlook, sentiment overall remains fragile as the Federal Reserve pursues its path of policy normalization and tech companies continue to slide.

The Stoxx Europe 600 Index rose for the first time in three days, with telecom firms leading the way after Vodafone Group Plc’s results. The euro recovered from its weakest against the dollar since June 2017. Emerging market equities and currencies were steady.

Terminal users can read more in our Markets Live blog.

Coming Up

• Tuesday marks the deadline set by the EU for Italy to revise its budget.
• Chinese industrial production and retail sales data due Wednesday.
• Fed Chairman Jerome Powell discusses national and global economic issues with Dallas Fed President Robert Kaplan at an event hosted by the Dallas Fed.
• U.S. consumer inflation probably rebounded in October after easing in September. The consumer price index data is projected to show a 0.3 percent increase from the prior month.
• Policy decisions are coming from central banks in Mexico, Philippines, and Thailand.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.2 percent as of 4:04 p.m. New York time.
• The Stoxx Europe 600 Index rose 0.7 percent.
• The U.K.’s FTSE Index rose less than 0.05 percent.
• The MSCI Emerging Market Index fell less than 0.05 percent.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.2 percent.
• The euro gained 0.6 percent to $1.1283, the first advance in a week.
• The British pound gained 0.8 percent to $1.2956.
• The Japanese yen rose less than 0.05 percent to 113.79 per dollar.

Bonds

• The yield on 10-year Treasuries dipped four basis points to 3.14 percent.
• Germany’s 10-year yield rose one basis point to 0.41 percent.
• Britain’s 10-year yield gained seven basis points to 1.521 percent.

Commodities

• West Texas Intermediate crude fell 7.8 percent to $55.23 a barrel, an 11-month low.
• LME copper rose 0.4 percent to $6,073.00 a metric ton.
• Gold climbed 0.1 percent to $1,201.93 an ounce.
• The Bloomberg Commodity Index fell 0.7 percent to an eight-week low.

--With assistance from Andreea Papuc, Luke Kawa and Eddie van der Walt.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

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

©2018 Bloomberg L.P.