US stocks drift as trade deal euphoria fades, dollar gains

Bloomberg

Stocks declined in Europe and US index futures dipped on Tuesday as the global rally in equities eased, with the sugar rush of a partial trade deal between the two largest economies fading and investors on the hunt for fresh catalysts. Treasuries were steady.
Declines in banks and consumer-goods companies undercut European stocks. Unilever tumbled after a sales-growth warning and Lloyds Banking Group Plc slumped after Citigroup Inc said the lender had the most disappointing results in a Bank of England stress test. That put the Stoxx Europe 600 Index on course for its first drop in five sessions as it failed to absorb momentum from Asia, where a benchmark gauge climbed to the highest level since mid-2018. S&P 500 futures were flat after the underlying index closed at a fresh record high in the wake of the partial US-China trade agreement.
The British pound sank the most since July versus the euro after newly elected prime minister Boris Johnson proposed a legal change that revived the chances of a no-deal Brexit. Meanwhile, labour-market data on Tuesday displayed further signs of nervousness over the UK’s relationship with the European Union. European government bonds drifted higher. The dollar advanced against most of its biggest peers.
Investor sentiment received a boost after the US suspended a December 15 tariff hike planned on Chinese imports. But while a $44 trillion global gauge of stocks is at an all-time high and benchmarks in Europe and the US are also hovering near record levels, there are lingering concerns over the strength of a China accord whose full details aren’t public. The warning by personal-goods bellwether Unilever also took some of the shine from improved forecasts for the global economy.
“We are in danger of peak optimism because we don’t have a trade deal signed and there are still some things that can go wrong,” Kristina Hooper, chief global market strategist at Invesco, said.
“There is this general euphoria because economic policy uncertainty has come down, but I do think it could lead to frothy markets that could be made vulnerable if something goes wrong.”
Elsewhere, West Texas-grade oil held near a three-month high. In the metals market, palladium surged through $2,000 an ounce to a record amid a global shortage.
The Stoxx Europe 600 Index sank 0.7% as of 10:28 a.m. London time. Futures on the S&P 500 Index decreased 0.1%. Germany’s DAX Index fell 0.6%. The UK’s FTSE 100 Index dipped 0.1%. The MSCI Asia Pacific Index jumped 0.8%.
The Bloomberg Dollar Spot Index increased 0.1%. The British pound sank 1% to $1.3202. The euro increased 0.1% to $1.1156. The Japanese yen was little changed at 109.60 per dollar.The South Korean Won advanced 0.5% to 1,166.10 per dollar.
The yield on 10-year Treasuries declined one basis point to 1.86%. Germany’s 10-year yield dipped one basis point to -0.28%. Britain’s 10-year yield decreased four basis points to 0.785%.
The Bloomberg Commodity Index increased 0.1% to 80.26. West Texas Intermediate crude climbed 0.1% to $60.25 a barrel. Gold gained 0.2% to $1,478.75 an ounce.