Stocks retreat, US Treasuries steady; yuan gains on trading

Bloomberg

All eyes were on benchmark Treasuries on Tuesday as trading reopened in the wake of last week’s selloff and following a holiday. The 10-year yield crept up to a fresh seven-year high before erasing the move, while US equity futures slid with stocks across Asia and Europe.
Both the S&P 500 and the Stoxx Europe 600 Index looked poised for a fourth day of declines, even as yields pulled back from the 3.25 percent they touched earlier. The MSCI Asia Pacific Index notched a seventh straight drop, though stocks in Shanghai rose following the biggest selloff in more than three months. The yuan gained in onshore trading after sliding a day earlier — a move that has prompted concern within the American administration. Japanese stocks slumped.
Italy’s FTSE MIB Index started on the front foot, though it reversed gains to edge closer to a bear market. The country’s 10-year yields climbed again as Finance Minister Giovanni Tria appealed for calm amid the war of words between the government and European Union authorities. The pound weakened amid a slew of Brexit warnings.
A gloomy mood continues to permeate markets, and it looks like the latest report from the IMF will do little to spur investor confidence. The fund has reduced its outlook for global growth for the first time since 2016, in part because of growing trade tensions between the world’s two largest economies. China took steps to aid lending this week, a move that inevitably puts pressure on the yuan, with weakness of the currency threatening to further aggravate the trade tensions in a vicious circle that could prompt more Chinese easing.
“If the trade confrontation continues, the Chinese currency will go lower and that will create a whole host of problems for the global economy,” said Alicia Levine, chief strategist at BNY Investment Management.
Next up, traders need to brace themselves for some $230 billion of Treasury auctions this week. Elsewhere, oil traded in New York advanced toward $75 a barrel. Iron ore futures in Dalian jumped to the highest level in almost three weeks on demand. South Korea’s market was closed for a holiday.
The US Treasury has $230 billion worth of debt auctions this week. The IMF and World Bank will hold meetings in Bali from Friday, where finance chiefs from around the world will gather. A closely watched gauge of US consumer prices probably remained elevated in September and rose 2.3 percent from a year earlier, according to forecasts ahead of Thursday’s release. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off earnings season for US banks on Friday.

STOCKS
Futures on the S&P 500 Index decreased 0.5 percent as of 8:43 a.m. New York time, to the lowest in more than a month. The Stoxx Europe 600 Index declined 0.5 percent to the lowest in about six months. The UK’s FTSE 100 Index dipped 0.5 percent to the lowest in six months. Germany’s DAX Index sank 0.6 percent, reaching the lowest in more than six months on its fifth straight decline. The MSCI Asia Pacific Index sank 0.9 percent, hitting the lowest in 15 months with its seventh consecutive decline. The MSCI Emerging Market Index fell 0.3 percent to the lowest in almost 17 months.

Bonds
The yield on 10-year Treasuries was unchanged at 3.23 percent, the highest in more than seven years. Germany’s 10-year yield climbed two basis points to 0.55 percent.