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Stocks End Week Lower Amid Hints of Slowing Growth: Markets Wrap

Stocks Drop, Bonds Climb After German Data Shocker: Markets Wrap

Stocks End Week Lower Amid Hints of Slowing Growth: Markets Wrap
A trader works while wearing Levis Strauss & Co. clothing during the company’s initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Jeenah Moon/Bloomberg)

(Bloomberg) --

U.S. equities ended the week lower and Treasuries rose amid more signals that global growth is slowing. The dollar advanced against most major currencies, while the three-month/10-year yield curve inverted for the first time since 2007.

Despite a dovish turn by the Fed Wednesday, the S&P 500 Index on Friday saw its biggest drop since January -- and lost 0.8 percent for the week -- with materials and financials leading the benchmark down as the yield on 10-year Treasuries, already at a 14-month low, extended its decline. Growth fears also took a toll on crude, and energy shares tumbled. Investors sought refuge in utilities, while gold headed for its best week since early February.

“The inversion historically has not been a good sign for the economy going ahead,” according to Ed Keon, chief investment strategist and portfolio manager at QMA. “But there’s deeper issues which we don’t fully understand and which the markets are grappling with. It’s not just cyclical signs that a flatter yield curve tends to be a sign of weaker economic growth ahead, but that the secular change where rates around the world in all the developed countries have been remarkably low.”

Banks and industrial shares led the Stoxx Europe 600 lower after German purchasing manager data badly missed forecasts. Sovereign bonds in Europe quickly reversed earlier losses and the euro erased a modest gain. The yield on Germany’s 10-year bonds -- Europe’s benchmark -- tumbled below zero.

Stocks End Week Lower Amid Hints of Slowing Growth: Markets Wrap

The surprise to stock and bond markets pulled the MSCI index of global equities down from its highest level since October, eroding some of the optimism that the Federal Reserve’s dovish tilt could prolong the bull market for stocks. Bonds, however, were already signaling investor worries that momentum in growth and inflation remains too subdued.

Hours before the 10-year yield tumbled in Germany, its counterpart in Japan fell to the lowest since 2016, New Zealand’s dropped below 2 percent for the first time and Australia’s was approaching an all-time low, as the world’s major central banks wound up another week showing they can’t yet tighten policy. Trade talks between the U.S. and China are scheduled to continue next week.

Elsewhere, sterling advanced after European leaders moved to stop a chaotic no-deal Brexit from happening next week, handing the U.K. an extra two weeks. The U.K. now needs to decide by April 12 what it will do next. In Asia, a late-day turnaround put benchmark stock indexes in Japan, Korea and Australia back into the green.

These are the main moves in markets:

Stocks

  • The S&P 500 Index decreased 1.9 percent as of 4 p.m. New York time.
  • The Stoxx Europe 600 Index fell 1.2 percent.
  • Germany’s DAX Index fell 1.6 percent to a one-month low.
  • The MSCI Emerging Market Index dipped 1 percent, the largest decrease in two weeks.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3 percent.
  • The euro decreased 0.7 percent to $1.1297, the largest dip in more than two weeks.
  • The British pound rose 0.7 percent to $1.3198.
  • The Japanese yen rose 0.8 percent to 109.97 per dollar.

Bonds

  • The yield on 10-year Treasuries sank 10 basis points to 2.44 percent, the lowest in more than 14 months.
  • Germany’s 10-year yield dipped six basis points to -0.02 percent.
  • Britain’s 10-year yield fell five basis points to 1.014 percent.

Commodities

  • West Texas Intermediate crude sank 1.8 percent to $58.91 a barrel.
  • Gold advanced 0.2 percent to $1,312.58 an ounce.

--With assistance from Adam Haigh, Cecile Gutscher and Todd White.

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: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn

©2019 Bloomberg L.P.