US stock futures track global retreat; euro dips

Bloomberg

A downbeat mood settled over markets on Tuesday, as fears surrounding the populist Italian government’s fiscal plans topped a list of reasons for caution. US equity futures tracked losses across Europe and Asia, the euro dropped a fifth day, and Treasuries and bunds advanced.
Contracts for the S&P 500, Nasdaq and Dow Jones indexes all followed the Stoxx Europe 600 and MSCI Asia Pacific gauges lower. Europe’s common currency touched the weakest in six weeks after the head of Italy’s lower house budget committee said the nation would have solved its fiscal problems with its own currency, and the leader of the European Commission warned of a Greek-style crisis. Reassurances that the country has no plans to ditch the euro did little to calm nerves, and Italian bonds extended a recent slump, while the region’s safer “core bonds” climbed.
The dollar climbed against almost all its major peers amid the risk-off mood, and emerging-market assets dropped. The pound slumped as Brexit and the annual conference of the governing Conservative Party continued to dominate headlines. Earlier in Asia stocks in Hong Kong underperformed as traders returned from a long weekend, and equities also fell in Australia and South Korea. Japan was a bright spot as the Nikkei 225 Stock Average ticked up a day after closing at its highest since 1991.
While a deal between the US and Canada to revamp the Nafta trade deal with Mexico gave global risk appetite a boost at the start of the week, investor sentiment remains fragile amid a laundry list of threats to markets. Beyond Italy, Sino-American tensions are back in focus after the Chinese navy dispelled a US missile destroyer from waters near South China Sea islands, in Beijing’s account of the incident. Meanwhile, political drama in Washington still swirls around President Donald Trump’s Supreme Court nominee, which may feed through to November congressional elections and affect the outlook for the administration’s agenda.
Elsewhere, West Texas oil traded near its highest in almost four years as a slowdown in US drilling adds to concern over supply losses from Iran and Venezuela. Indonesia’s rupiah fell past 15,000 per dollar for the first time since 1998 a day after inflation came in slower than forecast.
STOCKS
The Stoxx Europe 600 Index dipped 0.6 percent as of 8:40 a.m. New York time, the lowest in almost two weeks. Futures on the S&P 500 Index fell 0.1 percent. The UK’s FTSE 100 Index fell 0.5 percent. Germany’s DAX Index declined 0.7 percent. The MSCI Emerging Market Index declined 1.4 percent to the lowest in almost two weeks on the largest drop in almost four weeks.

CURRENCIES
The Bloomberg Dollar Spot Index climbed 0.2 percent to the highest in three weeks. The euro dipped 0.3 percent to $1.1542, reaching the weakest in almost six weeks on its fifth straight decline. The British pound declined 0.5 percent to $1.298.

BONDS
The yield on 10-year Treasuries decreased one basis point to 3.07 percent. Germany’s 10-year yield dipped three basis points to 0.44 percent, the lowest in almost three weeks. Britain’s 10-year yield decreased three basis points to 1.562 percent. Italy’s 10-year yield gained six basis points to 3.359 percent, the highest in more than four years.

COMMODITIES
West Texas Intermediate crude rose 0.1 percent to $75.37 a barrel, the highest in almost four years. Gold climbed 0.5 percent to $1,194.39 an ounce.