markets

Trump Rallies Dollar as Stocks Wobble, Crude Falls: Markets Wrap

Updated on
  • Comments push gold lower; Draghi touts robust growth
  • Treasury yields fall; Dow Jones Industrial Average rises
Mnuchin should "clarify exactly what he said," IMF head Christine Lagarde says in Davos.

President Donald Trump waded into the unusual public debate over currency valuations, roiling markets after he said that he favored a strong greenback just a day after his Treasury secretary endorsed a weak dollar.

“The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar,” Trump said during an interview with CNBC from the World Economic Forum in Davos, Switzerland.

The comments jolted the dollar out of a three-day tailspin, sent U.S. stocks lower and pushed Treasuries higher. Currency markets have been jarred this week, first by Mnuchin’s unusual favoring of a weak greenback. The dollar tumbled further early Thursday and the euro rallied to a three-year high after European Central Bank President Mario Draghi said robust growth justified gains in the common currency. Draghi also issued a veiled rebuke of Mnuchin’s break from convention.

Read more: Draghi Hits Back at Mnuchin in Global Currency War of Words

Stocks were virtually unchanged after erasing earlier gains as investors assessed the impact of the greenback’s gyrations on equities. Corporate results had set the tone, with major indexes at the whim of big moves in individual stocks. Caterpillar Inc. and 3M Co. advanced on strong forecasts, while Newell Brands Inc. tumbled when the company said it plans to sell off a swath of business. In late trading, Intel Corp. rallied after topping estimates and Starbucks Corp. shares retreated.

European Central Bank President Mario Draghi sees “very few chances” that interest rates could be raised this year.

(Source: European Central Bank)

“You tend not get too many comments on the dollar’s value from either Treasury secretaries or presidents, it’s a rare event. So the market tends to pay attention when they do happen,” Shahab Jalinoos, global head of foreign-exchange strategy at Credit Suisse, said by phone. “The market can easily imagine the idea that this White House might well change its stance on the currency.”

Trump’s comments roiled a market where investors are already on edge as Mnuchin and Draghi engaged in public discussions of currency levels. That has investors reassessing the global risk-on rally that’s stretched valuations across asset classes. So far, U.S. equities have continued to march higher amid solid corporate results, but rising currencies have threatened stock gains from Japan to Europe. Investors are also casting a watchful on the World Economic Forum, where Trump will deliver a keynote as his administration ramps up protectionist rhetoric.

Terminal users can read more in our markets blog.

Here’s what to watch out for this week:

  • Earnings season is in full swing: Intel, LVMH Moet Hennessy Louis Vuitton, Starbucks and Hyundai Motor all come this week.
  • Barring any last minute changes in Washington, Trump will join world leaders and senior executives in Davos for the annual World Economic Forum.
  • The U.K. House of Lords is considering Prime Minister Theresa May’s Brexit bill this week.

These are the main moves in markets:

Stocks

  • The S&P 500 Index rose less than 0.1 percent to 2,839.25 as of 4 p.m. New York time.
  • The Dow Jones Industrial Average gained 140.67 points to 26,392.79.
  • The Stoxx Europe 600 Index dropped 0.6 percent.
  • The U.K.’s FTSE 100 Index fell 0.4 percent.
  • The MSCI Emerging Market Index gained 0.1 percent, hitting the highest in more than 10 years.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 percent, after hitting the lowest in more than three years.
  • The euro was little changed at $1.2408, after touching the strongest in more than three years.
  • The British pound fell 0.7 percent to $1.4146.
  • The Japanese yen was steady at 109.26 per dollar.
  • The MSCI Emerging Markets Currency Index rose 0.6 percent.

Bonds

  • The yield on 10-year Treasuries fell three basis points to 2.62 percent.
  • Germany’s 10-year yield increased two basis points to 0.61 percent.
  • Britain’s 10-year yield climbed one basis point to 1.41 percent.

Commodities

  • West Texas Intermediate crude fell 0.6 percent to $65.21 a barrel.
  • Gold dropped 0.8 percent to $1,348.24 an ounce.

— With assistance by Samuel Potter, Kailey Leinz, Eddie van der Walt, and Sarah Ponczek

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