Dow Average heads for record, Treasuries dip

Bloomberg

US stocks advanced to fresh records in thin trading ahead of a holiday. The rally in global bonds extended as investors weighed the prospect of more dovish appointees to two of the world’s major central banks.
Ten-year Treasury yields dipped to the lowest since November 2016 on rising market bets that the Federal Reserve will cut rates this month. Stock investors piled into high dividend-yielding sectors like utilities and REITs, powering the S&P 500 to a fifth straight gain and putting the Dow Jones Industrial Average on track for
its first closing record since October. Volumes were 15 percent below the 30-day average.
The dollar fell after jobless claims came in broadly as forecast and private hiring numbers missed expectations. A reading on the services sector fell to the lowest since 2017, but Wednesday’s batch of data did little to move markets, with jobs numbers coming on Friday. The euro erased a small drop as purchasing manager data for the region was revised slightly higher.
“The markets are really looking to corroborate economic evidence for a rate cut, so latest data could put some energy into this short trading day,” said Mike Loewengart, vice president of investment strategy at E*TRADE Financial.
Europe’s leaders have nominated Christine Lagarde to take the helm of the ECB later this year, ushering in a candidate analysts anticipate will take up departing President Mario Draghi’s mantle in providing stimulus. And US President Donald Trump said he’s planning to nominate Christopher Waller and Judy Shelton to serve on the Fed Board, candidates both seen as likely to advocate lower interest rates.
The yield difference between Italian 10-year government bonds and the equivalent German securities fell to below 200bps for the first time since May 2018 after the European Commission deciding not to penalise Italy for breaking government spending limits. “An absence of inflation, the shortages of ‘safe’ positive yielding bonds that is a legacy of QE, geopolitical concerns and a dovish monetary policy bias almost everywhere are seeing the bond rally go on, and on,” Kit Juckes, chief global FX strategist at Societe Generale, wrote in a note.
Elsewhere, oil rebounded after tumbling earlier. Shares in Japan, China and South Korea led losses in Asia as equities in Australia edged higher. The yen strengthened after the Bank of Japan made small tweaks to its bond buying program.
US markets equity markets closed at 1 pm on Wednesday and remain shut on Thursday for the Independence Day holiday. The US jobs report is due on Friday and is projected to show non-farm payrolls rose by 164,000 in June, rebounding from 75,000 the month prior.
The S&P 500 Index increased 0.5 percent in New York, hitting the highest on record with its fifth straight advance. The Stoxx Europe 600 Index jumped 0.8 percent, reaching the highest in almost 13 months on its fifth consecutive advance and the biggest increase in more than two weeks.
The MSCI Emerging Market Index dipped 0.5 percent, the biggest decrease in more than a week. The MSCI Asia Pacific Index fell 0.3 percent, the largest fall in a week.
The Bloomberg Dollar Spot Index decreased 0.1 percent, the biggest dip in more than a week. The euro increased less than 0.05 percent to $1.1288. The British pound fell 0.1 percent to $1.2576, the weakest in more than two weeks. The Japanese yen climbed 0.1 percent to 107.73 per dollar, the strongest in more than a week.
The yield on 10-year Treasuries declined two basis points to 1.96 percent, the lowest in more than two years.
Germany’s 10-year yield dipped two basis points to -0.38 percent, hitting the lowest on record with its fifth straight decline. Britain’s 10-year yield fell three basis points to 0.689 percent, the lowest in almost three years.
West Texas Intermediate crude gained 0.9 percent to $56.73 a barrel.