US stocks retreat, treasuries advance with gold

Bloomberg

Stocks slumped while Treasuries rose with gold as the new year rally in riskier assets faltered. Political risks rippled across foreign-exchange markets with the pound, Turkish lira and South Korean won leading declines.
The Dow Jones Industrial Average declined after Friday climbing within a point of 20,000. The yield on 10-year Treasury notes slid below 2.40 percent, while gold posted the first two-day gain since the US election. Sterling fell to a 10-week low amid uncertainty over the UK’s future trading role with Europe. Tensions between North and South Korea and debates on constitutional changes in Turkey sent a developing currencies index to the steepest drop in three weeks. Oil dropped for the first time in four days.
The Dow’s has spent the past month flirting with the round-number milestone, failing to take that level after Donald Trump’s election lifted stocks to all-time highs. Treasury yields sit lower than where they were before the Federal Reserve raised interest rates last month, while the dollar remained near a 14-year high. Overseas, currencies, not bonds, have become the preferred way for investors to express displeasure with political developments, because they are seen as less vulnerable to intervention.

Stocks
The S&P 500 Index fell 0.2% to 2,272.91 at 9:33 a.m. in New York. The measure closed Friday at an all-time high, capping a 6.4% advance since Trump’s poll. The Dow slipped 40 points to 19,950. It’s been stuck in a 250 point range for the past month. The Stoxx Europe 600 Index fell 0.5%, on course for its biggest decline in more than a month. Shares of Cambridge, Massachusetts-based Ariad Pharmaceuticals Inc. were halted before Osaka-based Takeda Pharmaceutical Co. announced a $4.66bn takeover.

Currencies
The pound fell 1.1 percent to $1.2147, and earlier dropped as much as 1.3 percent to the lowest since Oct. 28. Prime Minister Theresa May said Sunday that negotiations on Brexit will be about “getting the right relationship, not about keeping bits of membership.” A so-called hard Brexit may push the Bank of England to keep rates lower for longer, while weakening the pound and supporting foreign-focused companies in the main stock index. Korea’s won fell 1.3 percent and the lira 2.3 percent, dragging the MSCI Emerging Markets Currency Index 0.3 percent lower. The Bloomberg Dollar Spot Index was little changed. It’s down 0.8 percent since touching a 14-year high on Jan. 3. The yen fell 0.5 percent to 116.44 per dollar.

Commodities
West Texas Intermediate crude dropped 2.1 percent to $52.84 a barrel, ending its advance below $54 as an increase in U.S. drilling offset signs that OPEC members are sticking to planned output cuts. Gold rose 0.7 percent to $1,181.03 an ounce as demand was forecast to rise ahead of the start of the Chinese New Year, while a U.S. labor-market report Friday showed some signs of cooling. Holdings in exchange-traded funds backed by the metal rose for a second day on Friday, the first back-to-back increase since Nov. 9. Rubber for May on the Shanghai Futures Exchange climbed as much as 5.4 percent to 18,995 yuan ($2,739) a ton after Thai plantations were inundated. Copper for delivery in three months dropped 0.4 percent to $5,569 a ton on the London Metal Exchange.

Bonds
Spanish and Portuguese bonds led gains in Europe. Spain’s 10-year yield fell seven basis points to 1.46 percent, while that on similar-maturity Portuguese debt fell eight basis points to 3.93 percent. U.K. bonds climbed, with 10-year yields falling five basis points to 1.32 percent.