The dollar rallied at the start of a week packed with catalysts, from economic data to new debt supply, as the yield on benchmark U.S. Treasuries threatened to climb above 3 percent. European stocks were steady after most equities across Asia retreated.
The greenback strengthened against major peers as the yield on the U.S. 10-year note hit 2.99 for the first time since 2014 before paring the increase. S&P 500 Index futures fluctuated before rising, the Stoxx Europe 600 Index erased a slide and the MSCI Asia Pacific Index fell. The pound joined major currencies retreating against the dollar as U.K. Prime Minister Theresa May battled to avert a cabinet revolt over Brexit. The euro also weakened on signs the European economy remains in low gear.
As tension over trade between the U.S. and China appears to ebb — Treasury Secretary Steve Mnuchin said he’s “cautiously optimistic” on reaching an agreement — and North Korea pledges to dial back its nuclear ambitions, traders could be forgiven for breathing a sigh of relief. But they must now come to terms with a deepening government bond selloff that has implications for everything from company borrowing costs and the strength of the dollar to investor allocations.
“Ultimately it’s hard to see a move sustained above 3 percent on the U.S. 10-year,” Mitul Kotecha, a strategist at TD Securities, told Bloomberg TV from Singapore. “Some of the dialing down in tensions, in risk aversion, may be having some impact there as well as expectations of continued strong growth in the U.S.”
Elsewhere, West Texas oil dropped after rising for a second week on a commitment from OPEC to rebalance the market. Gold declined. Aluminum and nickel fell after the U.S. signaled it could provide sanctions relief to United Co. Rusal and extended the deadline for companies to wind down dealings with Russian aluminum producer. — Bloomberg