Stocks slide as 10-year yield drops back below 2 percent

Bloomberg

US stocks fell while gains in Treasuries pushed the 10-year yield below 2 percent as simmering geopolitical tensions damped investor appetite for risk. Gold jumped.
The S&P 500 dropped for a third-straight session, the longest since May 9, as US officials downplayed expectations of a resolution to the trade war ahead of highly-anticipated meeting between President Donald Trump and China’s Xi Jinping this week. The 10-year Treasury yield slipped back below 2 percent, a level that until last week it hadn’t breached in three years, as fresh economic data added to concern the world’s largest economy is slowing.
West Texas oil rose as investors weighed escalating tensions between the US and Iran against the possibility of OPEC+ extending production cuts. Gold jumped to the highest in six years and the yen hit the strongest since January against the dollar. German bund yields fell to a record.
With stress between the US and Iran building and the White House apparently playing down hopes of a trade breakthrough when Trump and China’s Xi Jinping meet this week, investors are finding few reasons to prolong the recent central bank-fuelled rally.
On Tuesday, traders will keep a close eye on Federal Reserve Chairman Jerome Powell, who discusses monetary policy in a speech in New York, amid bets that the central bank will make deep cuts to interest rates this year.
There’s “the short-term headlines related to people watching the G-20 and the potential for any news related to the US-China negotiations. That’s one piece that in the shorter run is making the markets a little uneasy.
The other one is related to the geopolitical tensions with Iran,” said Omar Aguilar, the chief investment officer for equities at Charles Schwab Investment Management.
“The bigger picture still drives the markets, which is we have lower interest rates coming up and the market continues to place a big bet on a July rate cut by the Fed.”
Elsewhere, Drugmaker Allergan surged after agreeing to be bought by AbbVie Inc. Bitcoin extended its gains through $11,000.
Benchmarks in Shanghai and Hong Kong led the Asia retreat as China Merchants Bank tumbled as much as 10 percent. The Washington Post reported a US judge has found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations.
Fed Chairman Jerome Powell was expected to speak at the Council on Foreign Relations in New York on Tuesday.
MSCI Inc announced results of its 2019 Market Classification Review on Tuesday, including whether Kuwait gets upgraded from frontier to emerging-market status.
The Group of 20 summit is in Osaka, Japan on Friday and on Saturday.
The S&P 500 Index fell 0.4 percent in New York. The Stoxx Europe 600 Index dipped 0.1 percent to the lowest in more than a week. The MSCI Emerging Market Index sank 0.6 percent. The MSCI Asia Pacific Index decreased 0.3 percent.
The Bloomberg Dollar Spot Index fell less than 0.05 percent. The euro fell 0.1 percent to $1.1392, the first retreat in a week. The British pound declined 0.1 percent to $1.2729. The Japanese yen climbed 0.3 percent to 106.97 per dollar, the strongest in more than 14 months.
The yield on 10-year Treasuries declined two basis points to 1.99 percent. Germany’s 10-year yield fell one basis point to -0.32 percent, the lowest on record. Britain’s 10-year yield dipped less than one basis point to 0.813 percent.
West Texas Intermediate crude rose 0.4 percent to $58.28 a barrel. Gold increased 1.2 percent to $1,435.40 an ounce, reaching the highest in more than six years.