US stocks fell Friday after a steady inflation report added to speculation that the Federal Reserve will be slow to hike rates this year and political turmoil surrounding the continuing government shutdown that grows more contentious by the day. The Treasury rose, oil dropped below $52 a barrel and the dollar was steady, putting it on track for its fourth week of declines.
All major equity benchmarks were lower. The S&P 500 slid as energy shares tumbled more than 14%, trimming its third straight weekly advance to 2%. The post-Christmas rally reached 10% before stalling 2,600, a level it hasn’t topped since mid-December. The Stoxx Europe 600 Index was down slightly after an earlier gain. In Asia, shares rose in Shanghai, Tokyo, Seoul and Hong Kong amid hopes for a breakthrough on the trade dispute between China and US.
The dollar has been pressured and bonds have been boosted by the Federal Reserve’s message of patience on further interest-rate hikes. That case was bolstered by US price data showing inflation slowing in line with expectations. European debt tracked Treasuries higher. The pound advanced even as Prime Minister Theresa May’s office countered reports that Brexit may be delayed.
Stocks are still on track for big gains this week amid signs of progress between the world’s two biggest economies on trade and the Fed’s dovish commentary. Nevertheless, worries remain about economic growth and earnings prospects, while there’s also uncertainty as the US partial government shutdown threatens to extend into a fourth week.
Chinese Vice Premier Liu He is set to visit Washington on January 30 and 31 for further trade talks. China’s yuan, which slumped last year as trade tensions worsened, is heading for its best week since 2005 back when the country dropped a fixed peg to the dollar.
These are the main moves in markets:
The S&P 500 Index was down 0.5% at 9:38 a.m. in New York, the first retreat in more than a week. The Stoxx Europe 600 Index dipped 0.2%. The MSCI All-Country World Index climbed 0.1%, hitting the highest in more than four weeks with its sixth consecutive advance. The MSCI Emerging Market Index advanced 0.3% to the highest in more than five weeks.
The Bloomberg Dollar Spot Index was little changed. The euro gained 0.3% to $1.153. The Japanese yen increased 0.1% to 108.31 per dollar. The British pound jumped 0.5% to $1.2817, the strongest in more than six weeks. The MSCI Emerging Markets Currency Index climbed 0.1% to the highest in almost seven months.
The yield on 10-year Treasuries fell five basis points to 2.6918%, the biggest fall in more than a week. Germany’s 10-year yield decreased one basis point to 0.24%. Britain’s 10-year yield increased one basis point to 1.289%, the highest in more than two weeks. The spread of Italy’s 10-year bonds over Germany’s fell three basis points to 2.6008 percentage points.
The Bloomberg Commodity Index increased 0.4%. West Texas Intermediate crude fell 0.5% to $52.34 a barrel, the first retreat in more than two weeks. LME copper climbed 0.4% to $5,953.50 per metric ton. Gold gained 0.1% to $1,288.34 an ounce.
2019 Bloomberg L.P