Stocks decline with the dollar as treasure goes up: markets fall back

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Stocks dropped and Treasury bills climbed as investors assessed the latest news on trade negotiations and expected more evidence on monetary policy.

The S & P 500 Index ended a three-day rally after US Secretary of State Michael Pompeo told CNBC that Huawei Technologies Co. is not the only Chinese company to present risks. He also sees the United States and China continuing their talks – at least by telephone – during the week or the next 10 days. Later Tuesday, President Donald Trump said he was not ready to reach an agreement with China and stressed the need for a "big" rate cut by the Federal Reserve. The 10-year benchmark returns have fallen while the dollar has fallen from its peak this year. Italian bonds jumped when Prime Minister Giuseppe Conte resigned.

Just a day after markets buoyed up the progress of trade talks, investors took a more cautious approach. Trump's chief economic advisor, Larry Kudlow, spoke with business leaders this week about concerns over the recession, the trade war, and the stalled markets. Pacific Investment Management Co. has narrowed its positions on public debt on financial grounds that a breakthrough in US-China trade talks could spark a selloff, the Financial Times reported. Traders are also preparing for a speech by Fed President Jerome Powell at the Jackson Hole Symposium on Friday.

"It's kind of an unstable environment," said Dan Skelly, head of equity portfolio portfolios at Morgan Stanley Wealth Management, in a phone interview. "The liquidity of the month of August will be pretty mediocre, which, in my opinion, certainly limits the upside potential, but it increases the risk that you will sell more heavily at one point."

Read: JPMorgan's Kolanovic sees return to pivot position by end of August

The choice of Wall Street guards handpicked by Trump has lifted the controversial ban imposed by the Volcker rule on banks to make speculative investments, thus closing one of the main deregulation priorities long sought by the US. financial sector. Nevertheless, the banking stocks recorded larger losses in the market.

In corporate news, Home Depot Inc. surged after its results largely cleared investor expectations – or at least, were not worse than expected on Wall Street. Beyond Meat Inc. jumped after JPMorgan stepped up from neutral to overweight. Baidu Inc. flew after the China-based Internet company announced an unexpected growth in its turnover in the month of June. Kohl's Corp. recorded a turnover below expectations.

Here are some notable events to come:

• The minutes of the July Fed meeting will provide details on the discussions that led to the first interest rate cuts in a decade, when they will be released on Wednesday.
• Thursday, the decision of the Bank of Indonesia on the interest rate and press conference with Governor Perry Warjiyo
• Instant PMI indices are expected in the eurozone on Thursday.
• The Kansas City Federal Reserve Bank is holding its annual Central Bank Symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will present his remarks on Friday.

Here are the main movements on the markets:

stocks

• The S & P 500 fell 0.8% to 2,900.51 at 16 hours. New York time.
• The Stoxx Europe 600 index decreased by 0.7%.
• The MSCI Asia Pacific index rose 0.6%.

Coins

• The Bloomberg Dollar Spot Index decreased by 0.3%.
• The euro rose 0.2% to $ 1,110.
• The Japanese yen rose 0.4% to 106.21 to the dollar.

Obligations

• The yield on 10-year Treasuries fell six basis points to 1.55%.
• Germany's 10-year rate fell four basis points to -0.69%.
• The 10-year British yield fell two basis points to 0.452%.

Basic products

• The Bloomberg Commodity Index has changed little.
• West Texas Intermediate crude climbed 0.2% to $ 56.34 per barrel.
• Gold rose 0.3% to $ 1,516.70 an ounce.

– With the help of Sybilla Gross, Andreea Papuc, Todd White and Laura Curtis.

To contact the reporters on this story: Rita Nazareth in New York at [email protected] and Sarah Ponczek in New York at [email protected]

To contact the makers of this story: Jeremy Herron at [email protected], Rita Nazareth

© 2019 Bloomberg L.P.