Stocks drop, bonds climb as investors weigh trade

Bloomberg

US equity-index futures retreated with stocks in Europe and Asia on Wednesday as investors digested President Donald Trump’s latest comments on trade as well as ongoing unrest in Hong Kong. Treasuries led a bond rally.
Contracts on all three main American gauges pointed to a drop at the open after the S&P 500 closed just shy of a record a day earlier. Trump provided little new insight into the progress of US-China trade talks, but while he said a deal could happen soon he also warned of escalating tariffs if an agreement isn’t reached. The dollar held a modest gain after data showed a key measure of US inflation unexpectedly cooled in October.
Banks led the decline in the Stoxx Europe 600 index after disappointing earnings from ABN Amro Bank NV. Shares of Prosus NV dropped after China’s Tencent Holdings Ltd, in which it owns a 31% stake, posted quarterly earnings that missed the lowest analyst estimate. Spanish equities were the worst performers, extending their post-election losses. The euro was steady after industrial production in the region unexpectedly rose for a second month in September.
Hong Kong’s benchmark stocks gauge slumped as the city endured a third day of unrest, with lenders including HSBC Holdings Plc and BNP Paribas SA encouraging employees to stay at home as violence continued. Japanese shares retreated along with those in South Korea and Australia. New Zealand’s dollar jumped after the country’s central bank unexpectedly kept interest rates unchanged.
The conflict in Hong Kong is a reminder of lingering geopolitical risks as the end of the year approaches, while trade issues remain far from resolved.
The prospect of a deal between the world’s two biggest economies has become key to sustaining a rally that drove American stocks to records in recent days. The US and China have yet to announce a new location or time to seal the agreement after an international gathering in Chile was cancelled, and it’s unclear whether Trump’s renewed threats will move things forward.
On Wednesday, attention was expected to turn to Federal Reserve Chairman Jerome Powell’s appearance in Congress.
Elsewhere, gold jumped and crude oil fell. Emerging-market stocks and currencies declined.
Earnings season is slowing. Reports are due this week from companies including Japan Post Bank, Walmart, and Cisco.
Fed Chairman Jerome Powell addresses the Joint Economic Committee of Congress in Washington on Wednesday.
Thursday brings China retail sales and industrial production data.
US retail sales on Friday are forecast to rebound in October after unexpectedly falling the prior month.
The Stoxx Europe 600 Index declined 0.4% in New York. Futures on the S&P 500 Index declined 0.3%. The UK’s FTSE 100 Index declined 0.3%. The MSCI Emerging Market Index sank 01%.
The Bloomberg Dollar Spot Index gained 0.1%. The euro was little changed at $1.1004. The British pound slipped 0.1% to $1.2835. The Japanese yen weakened 0.1% to 108.86 per dollar.
The yield on 10-year Treasuries sank five basis points to 1.88%. Britain’s 10-year yield dipped six basis points to 0.75%. Germany’s 10-year yield declined four basis points to -0.29%. Japan’s 10-year yield fell two basis points to -0.042%.
West Texas Intermediate crude declined 0.5% to $56.52 a barrel. Gold climbed 0.5% to $1,463.93 an ounce.