Dollar gains, Treasuries drop on speculation of Fed Chair

Bloomberg

The dollar gained and Treasuries slipped on speculation the next Federal Reserve chairman will be more hawkish, while growing concern about the economic impact of Catalonia’s independence movement sent the euro lower.
The S&P 500 Index was little changed. Health-care stocks were among the best performers after UnitedHealth Group Inc. and Johnson & Johnson earnings beat estimates. European and Asian stocks fluctuated following North Korea’s warning that nuclear war could come at any moment. The pound weakened after Governor Mark Carney said the Bank of England is making contingency plans for a “hard” exit from the European Union. Ten-year Treasury yields topped 2.31 percent as odds rose that John Taylor will replace Janet Yellen at the Fed.
Taylor, who is known for a policy rule that would suggest higher interest rates, was said to have impressed President Donald Trump in an interview last week. That prompted investors to lift bets on a rate increase in December. A host of Fed speakers and the publication of the Beige Book this week may provide further clues about the US policy path.
US homebuilders’ confidence rebounded to a five-month high, indicating concern over fallout from major hurricanes has been alleviated. US factory production rose last month for the first time since June.
Spain, the euro-area’s fourth biggest economy, cut its growth forecast for 2018 to 2.3 percent from 2.6 percent, acknowledging the impact of an escalating political crisis in a region that accounts for a fifth of the country’s output. The Spanish state is turning up the pressure on the separatist leaders as PM Mariano Rajoy tries to persuade Catalan President Carles Puigdemont to drop his push
for independence. Among Fed speakers lined up this week are Philadelphia Fed President Pat Harker on Tuesday, and New York Fed President Bill Dudley and Dallas Fed President Robert Kaplan on Wednesday. Beginning construction on new homes and sales of previously owned properties will probably show the negative effects of Hurricanes Harvey and Irma on demand and building.
The S&P 500 was little changed at 10:01 am New York time. The Stoxx Europe 600 Index climbed 0.1 percent. The UK’s FTSE 100 Index rose 0.3 percent. Spain’s IBEX Index rose 1.1 percent. The MSCI Emerging Market Index sank 0.5 percent, the first retreat in more than a week. The Bloomberg Dollar Spot Index gained 0.4 percent to the highest in a week. The euro dipped 0.4 percent to $1.1746. The British pound declined 0.6 percent to $1.3176. The Japanese yen decreased 0.2 percent to 112.44 per dollar.
The yield on 10-year Treasuries increased one basis point to 2.31 percent. Britain’s 10-year yield fell six basis points to 1.27 percent. Spain’s 10-year yield fell one basis point to 1.54 percent. Japan’s Topix index closed 0.2 percent higher. Australia’s S&P/ASX 200 Index rose 0.7 percent in its fifth straight gain and South Korea’s Kospi index was up 0.2 percent.