Oil led commodities lower, pulling down the currencies of raw-material producing nations and helping lift government bonds.
Futures on the Standard & Poorâ€™s 500 Index retreated as crude slipped through $39 a barrel in New York in a fourth day of losses. Euro-area sovereign securities climbed as lower energy prices dimmed the outlook for inflation and the European Central Bank prepared to increase its asset-purchase plan by â‚¬20 billion a month in April. Treasuries advanced before a speech from Federal Reserve Chair Janet Yellen and several key pieces of economic data this week culminating in payrolls figures.
â€œThe correction in oil prices is outweighing any optimism about the economy in the markets,â€ said Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. â€œInvestors will also expect a little more hawkishness from Yellenâ€™s speech today. Although the likelihood of a rate increase in April is practically zero, many are looking for two more hikes by the end of the year.â€
After roiling financial markets as it slid in the first six weeks of the year, crude has since recovered and is on track for its first back-to-back monthly gains since May 2015. Recent advances arenâ€™t fully grounded in improved fundamentals, and commodities including oil and copper are at risk of steep declines as according to Barclays Plc. Financial markets are also hanging on the outlook for U.S. interest rates. April 1 data will show the worldâ€™s largest economy added 210,000 jobs this month, after climbing 242,000 in February, according to analyst estimates.
West Texas Intermediate crude fell 2.1 percent to $38.56 a barrel at 8:28 a.m. New York time. Germanyâ€™s 10-year bunds climbed, with the yield dropping as low as 0.14%, the least since March 1. The Stoxx Europe 600 Index rose 0.2 percent after earlier gaining as much as 1 percent.
West Texas Intermediate crude dropped further after sliding 5 percent over the past three sessions amid ongoing concern over a global glut in the commodity. Weekly U.S. government data is forecast to show increasing crude stockpiles kept supplies at the highest level in more than eight decades.
Brent futures in London lost 2.1 percent to $39.44. Indonesia will attend a meeting of major oil exporters in Doha next month to consider an output freeze, according to Energy and Mineral Resources Minister Sudirman Said.
Spot gold fell 0.2 percent to $1,218.88 an ounce. Copper, zinc and tin also declined, while aluminum rose as the London Metal Exchange reopened after two days of public holidays.
Barclays warned that some commodity prices may tumble as investors rush for the exits. Copper may slump to the low $4,000s a metric ton, from $4,945 in London last week, while oil could fall back to the low $30s a barrel, analyst Kevin Norrish wrote in a research note.
Commodity and energy producers suffered the biggest losses on the Stoxx 600. While the benchmark fell for four days through Thursday amid declines in banks and resource-related shares, it is still heading for its first monthly gain since November.
EasyJet Plc gained 1.3 percent after Bank of America Corp. raised its recommendation on the shares to buy from neutral, citing attractive valuations. Volkswagen AG slipped 1.5 percent after a report that it may suspend its dividend as it copes with the fallout of a diesel-emissions scandal.
S&P 500 Index futures slipped 0.3 percent, after the equity benchmark rose less than 0.1 percent on Monday. The index had advanced for five straight weeks, recouping all of its 2016 losses, before a three-day drop at the end of last week signaled the recovery may be running out of steam. As well as Yellenâ€™s speech to Economic Club of NY, investors assess a report that economists forecast will show consumer confidence improved in March.
Government debt across the euro area advanced, with German bunds, the regionâ€™s benchmark securities, rising for a fourth day in their longest winning stretch since January.
Spainâ€™s 10-year yield fell eight basis points, the most in two weeks, to 1.45 percent. Italyâ€™s slid six basis points to 1.24 percent. The yield on U.S. Treasuries due in a decade declined two basis points to 1.87 percent.
The 10-year gilt yield slid three basis points to 1.42 percent as the Bank of England said the outlook for U.K. financial stability is worsening and warned banks should begin building up capital earmarked to support lending when the economy turns down.
Norwayâ€™s krone and Australiaâ€™s dollar were among the worst performing major currencies. The Japanese yen weakened 0.1 percent at 113.54 per dollar, falling for an eighth day.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed, on course for a monthly drop of 2.6 percent, the biggest since April.
â€œThe dollar is really not your best bet right now,â€ Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in an interview on Bloomberg Television. â€œEvery time you have the dollar rising, concerns about China devaluation, concerns about emerging-market growth, concerns about commodity markets â€” those start to resurface.â€ Odds of the Fed raising rates at its June meeting have fallen to 34 percent, from 42 percent a week ago, according to Fed funds futures data compiled by Bloomberg.
The MSCI Emerging Markets Index was little changed. The gauge is 2.5 percent higher this year, its biggest quarterly increase since the period ended June 2014. Turkeyâ€™s Borsa Istanbul 100 Index added 1 percent and Hungaryâ€™s BUX climbed 0.9 percent.
The Shanghai Composite Index fell for a second day, sliding 1.3 percent, as property developers declined after the nationâ€™s biggest cities including Shanghai and Shenzhen rolled out measures late last week to tame soaring real-estate prices.