US stocks advance as dollar weakens against G-10 peers

Bloomberg

The dollar weakened against most of its G-10 peers, US stocks rose and Treasuries fell in the first official day of trading in 2018. European stocks started the year in the red, failing to capitalise on a positive Asian session as the strength of the region’s common currency weighed on exporters.
The Standard & Poor’s 500 Index opened higher after posting its best annual returns since 2013. The Stoxx Europe 600 Index dropped, with automakers leading the decline as most industry sectors headed lower. In Asia, the MSCI Asia Pacific Index climbed to a record, though markets in Tokyo remain closed until Thursday for Japanese holidays.
“The backdrop for the dollar is just not very good,” said Mark McCormick, head of FX strategy for North America for Toronto Dominion Bank. “The global reflation trade is progressing along and the backdrop is that we’re rotating into a regime shift and that comes with a changing backdrop for capital flows.”
European bonds dropped and the euro strengthened to near a three-year high against the dollar as the region’s manufacturing activity expanded in line with
estimates in December. The Bloomberg Dollar Index hit a three-month low, helping propel gold to the highest since September. West Texas oil fluctuated as Iran said protests in the country will fade in days.
Investors begin 2018 on the heels of a winning year for equities and a losing one for the greenback. Global stocks in 2017 posted their best performance since 2009, fueled by a synchronous expansion and a go-slow approach towards monetary-stimulus withdrawal in major economies. MiFID II, the biggest change to European investment industry rules in a decade, takes effect on Wednesday.
The Stoxx Europe 600 Index dipped 0.3 percent as of 10:15 am New York time, after reaching the lowest in almost four weeks. The UK’s FTSE 100 Index declined 0.6 percent. Germany’s DAX Index fell 0.1 percent, after touching the lowest in almost 14 weeks. The MSCI Asia Pacific Index jumped 0.9 percent. The MSCI Emerging Market Index jumped 1.5 percent to the highest in almost seven years. The S&P 500 Index climbed 0.6 percent, while the Dow Jones Industrial Average gained 0.4 percent and the NASDAQ Composite Index rose 1 percent.
The Bloomberg Dollar Spot Index declined 0.4 percent to 1,154.856, after touching the lowest in 14 weeks. The euro increased 0.2 percent to the strongest in about three years. The British pound climbed 0.4 percent to $1.355, the strongest in almost 15 weeks. The Japanese yen advanced 0.4 percent to 112.20 per dollar. The yield on 10-year Treasuries increased five basis points to 2.45 percent. Germany’s 10-year yield gained three basis points to 0.44 percent, the highest in almost 10 weeks. Britain’s 10-year yield advanced seven basis points to 1.26 percent.