Treasuries Rise With Gold, Dollar as U.S. Stocks Edge Higher

  • Signs of defensive posturing after monthlong risk-on rally
  • Fed chair calls labor market strongest in nearly a decade

Is the U.S. Dollar Overvalued?

A cautious tone spread through financial markets as the last full trading week in 2016 began.

U.S. stocks ended the session higher after twice paring gains amid incidents in Turkey and Germany that raised geopolitical concerns. Treasuries rose the most in two weeks, adding to an advance after Berlin police said at least nine people were killed after a truck rammed into a Christmas market. Gold advanced a second session, while the Swiss franc strengthened after Russia’s ambassador to Turkey was assassinated in Ankara. The lira fell with emerging-market stocks.

The incidents in Turkey and Germany added to a sense of geopolitical uncertainty after China on Friday seized a U.S. Naval drone and fighting escalated in Syria. Equities have struggled to add to a monthlong, post-election rally that took major U.S. benchmarks to records, with investors favoring haven trades again after a bond rout left Treasury yields at the highest since 2014. Market reactions were exacerbated Monday as volumes are thinning before the December holiday season.

“There are some investors who might see something like the assassination in Turkey and the potential terror attack in Berlin as opportunities to lock in profits with a couple of weeks left in the year,”said Philip Orlando, who helps oversee more than $360 billion as chief equities strategist at Federated Investors Inc. in New York.

Stocks

  • The S&P 500 rose 0.2 percent to 2,262.56 at 4 p.m. in New York, trimming a gain that reached 0.4 percent. The measure has advanced almost 6 percent since the Nov. 8 election, while the Dow Jones Industrial Average is up 8 percent. 
  • Trading in S&P 500 shares Monday was 23 percent below the 30-day average.
  • Emerging-market stocks slipped 0.7 percent for a fourth day of losses.
  • The Stoxx Europe 600 Index fell 0.1 percent, with miners leading declines. In a reversal of the recent rotation into cyclical shares, defensive stocks including utilities, real estate and technology firms rose.
  • Banca Monte dei Paschi di Siena fell 11 percent after the lender said it will begin selling shares to institutional investors this week as it aims to complete raising 5 billion euros ($5.2 billion) by the end of the year to avoid a rescue by the Italian government.

Currencies

  • The dollar declined 1 percent to 116.72 yen, after gaining for the past six weeks.
  • A broader Bloomberg gauge of the dollar rose 0.1 percent as it heads for a rally of more than 7 percent this quarter.
  • The Swiss franc strengthened 0.4 percent to 1.06838 per euro.

Bonds

  • Yields on 10-year Treasury notes lost six basis points to 2.53 percent after touching the highest level since September 2014 on Thursday.
  • German bonds lost seven basis points to 0.24 percent, while the yield on Spanish 10-year securities fell six basis points to 1.36 percent.
  • China’s 10-year sovereign yield rose five basis points to 3.40 percent. The yield surged 25 basis points last week, to 3.35 percent, as hawkish comments from the Federal Reserve and waning liquidity weighed on bond prices.

Commodities

  • Gold advanced for a second day as the dollar weakened. Bullion for immediate delivery rose 0.4 percent to $1,139.38 an ounce.
  • Oil rose 0.4 percent to $52.11 a barrel in New York.
  • Zinc fell and copper futures slumped to the lowest in four weeks after stockpiles climbed in London.
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