U.S. Stocks Dip Slightly as Korea Threat Recedes: Markets Wrap

Updated on
  • Havens yen and gold drop, VIX posts second day of declines
  • Dollar surges after U.S. retail sales top expectations

Richard Lacaille, chief investment officer at State Street Global Advisors, talks about market fear and risks for investors. He speaks with Bloomberg's Francine Lacqua on 'Bloomberg Surveillance.' (Source: Bloomberg)

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The dollar rallied and U.S. stocks fell, halting a two-day advance, as the threat of war with North Korea diminished. Treasuries extended losses after U.S. retail sales exceeded forecasts last month, boosting speculation that the Federal Reserve might raise interest rates again this year.

The S&P 500 Index and Nasdaq Composite Index drifted lower, while the Dow Jones Industrial Average rose slightly for a third straight day. Meanwhile, traditional havens such as gold and the yen slumped. Oil shrugged off early losses to post a gain. The CBOE Volatility Index, also known as the VIX, continued to tumble amid a return to calm in the stock market.

The Stoxx Europe 600 Index edged up after the German economy extended its growth spurt in the second quarter, albeit at a slower pace than expected. The British pound dropped to a five-week low after U.K. inflation unexpectedly held steady in July, clouding the outlook for rate increases.

July retail sales in the world’s biggest economy advanced by the most in any month this year, bolstering the case for more policy tightening. Federal Reserve Bank of New York President William Dudley earlier said he favored another rate hike in 2017.

Bloomberg Intelligence’s Seema Shah reports on U.S. retail sales for July.

(Source: Bloomberg)

Meanwhile, Japan’s currency -- a haven in times of global tension -- slumped after a North Korean media report indicated that dictator Kim Jong Un had decided not to launch a threatened missile attack on Guam. In addition, South Korean President Moon Jae-in vowed to avoid a conflict at any cost.

In Germany, data showed the economy expanded 0.6 percent in the second quarter, driven by domestic demand. That missed estimates slightly, but was accompanied by a revision in the first-quarter number. The euro retreated.

Terminal subscribers can read more on our Markets Live blog.

Here are some key events to watch this week:

  • On Wednesday, the Federal Open Market Committee will issue minutes from its July policy meeting that may hold clues to the Federal Reserve’s next rate hike. The same day, euro-area second-quarter GDP data is due.
  • Chinese tech titans Tencent Holdings Ltd. and Alibaba Group Holding Ltd. are among the companies reporting results this week.

And here are the main moves in markets:

Stocks

  • The S&P 500 and Nasdaq Composite closed down 0.1 percent. The Dow gained five points, or less than 0.1 percent, and the Russell 2000 Index dropped 0.8 percent.
  • The Stoxx Europe 600 Index increased 0.1 percent. 
  • The MSCI All-Country World Index declined 0.1 percent. 
  • Germany’s DAX Index jumped 0.1 percent. 
  • The U.K.’s FTSE 100 Index surged 0.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index jumped 0.4 percent.
  • The euro fell 0.4 percent to $1.1739, the lowest in three weeks.
  • The British pound dipped 0.8 percent to $1.2865.
  • The Japanese yen decreased 0.8 percent to 110.54 per dollar, the biggest decline since July 3.

Bonds

  • The yield on 10-year Treasuries climbed four basis points to 2.26 percent, the highest in a week. 
  • Germany’s 10-year yield advanced three basis points to 0.43 percent, the highest in a week. 
  • Britain’s 10-year yield gained one basis point to 1.08 percent.

Commodities

  • Gold declined 0.7 percent to $1,273.09 an ounce. 
  • West Texas Intermediate crude rose less than 0.1 percent to $47.61 a barrel after falling 2.5 percent on Monday.

Asia

  • Japan’s Topix index finished the day 1.1 percent higher and Australia’s S&P/ASX 200 Index gained 0.5 percent at the close. Hong Kong’s Hang Seng index dropped 0.3 percent as the Shanghai Composite Index rose 0.4 percent.
  • Markets in South Korea and India are closed Tuesday for holidays.

— With assistance by Adam Haigh, Garfield Clinton Reynolds, and Robert Brand

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