Stocks fall as Treasuries rally on global outlook

Bloomberg

The rally in bonds gained momentum as traders turned their focus to a worrying economic outlook. Stocks fell, while the dollar rose.
Treasury 10-year yields slid below 2.4 percent and rates on benchmark German bunds sank deeper under zero after European Central Bank President Mario Draghi said that an accommodative policy stance is still needed. Energy shares led losses in the S&P 500 Index as oil dropped below $60 a barrel after data showing an increase in US inventories. New Zealand’s dollar tumbled as the central bank joined the global shift away from tighter policy.
Traders piled into bonds amid mounting concern about a slowdown in global growth. Recent government and private data showed weakness from housing to retail sales and consumer sentiment, prompting a more dovish tone from the Federal Reserve and pushing investors to price in a good chance of a rate cut this year. A closely watched segment of the US yield curve inverted last week for the first time since 2007— a gauge that’s served as a recession warning.
“The performance of risk depends ultimately on what growth is,” Binky Chadha, Deutsche Bank’s chief global strategist, said on Bloomberg TV. “The current message from the last three weeks is easier monetary policies spook the markets about growth.”
Speculation that the Fed will consider lowering rates appears to have spread, with some — such as Legg Mason Inc unit Brandywine Global Investment Management — forecasting a cut this year. Stephen Moore, President Donald Trump’s pick for an open Fed board seat, said in a New York Times interview that the central bank should immediately cut rates by half a percentage point.
The Stoxx Europe 600 Index rebounded as banks gained, while Chinese shares advanced after a burst of diplomacy suggested Beijing and Washington remain determined to de-escalate their trade dispute.
US-China trade talks resume, with a cabinet-level American delegation due in China. UK Parliament was expected to stage several key votes on Brexit on Wednesday. Fed official Randal Quarles will speak on Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”
The S&P 500 fell 0.3 percent to 2,809.82 in New York. The Stoxx Europe 600 Index rose 0.3 percent. The MSCI Asia Pacific Index declined 0.2 percent. The MSCI Emerging Market Index decreased 0.4 percent.
The Bloomberg Dollar Spot Index climbed 0.3 percent. The euro declined 0.1 percent to $1.1251. The Japanese yen rose 0.2 percent to 110.43 per dollar. The British pound dipped 0.1 percent to $1.3201.
The yield on 10-year Treasuries declined six basis points to 2.36 percent. Germany’s 10-year yield dropped six basis points to -0.08 percent. Britain’s 10-year yield dipped two basis points to 0.985 percent. The Bloomberg Commodity Index fell 0.3 percent.
West Texas Intermediate crude dipped 0.2 percent to $59.82 a barrel.