Markets Wrap| Dollar rises, treasuries retreat as stocks slip

Crude surges on back of Syrian airbase strike

U.S. stocks ended a volatile session lower, while the dollar advanced with Treasury yields as investors looked past a U.S. military strike in Syria and worse-than-forecast hiring data.

The S&P 500 Index slipped amid volume 15 percent lower than the 30-day average, while the greenback capped its best week in two months. Comments from the Fed Bank of New York president bolstered speculation it bank won’t slow the pace of rate hikes as it trims its balance sheet. The 10-year Treasury yield topped 2.35 percent after falling as low as 2.28 percent amid a weak jobs report and the first military strike undertaken by President Donald Trump’s administration.

Financial markets showed resilience in the face of weaker-than-forecast hiring in the world’s largest economy and a ratcheting up of geopolitical tensions, with demand for haven assets abating. Volatility across equity markets came down from highs reached overnight. New York Fed President William Dudley’s comments come two days after Fed meeting minutes signaled officials discussed the timing for shrinking the central bank’s balance sheet as it tightens monetary policy.

“I would think we’d be seeing more risk off with everything that could happen into the weekend with Syria, to the continued lengthening of the tax plan timeline, as well as Dudley’s comments,” Andrew Brenner, head of international fixed income for National Alliance Capital Markets, said by phone. “But there’s a short base out there and people are under-invested in equities and very negative, which always keeps a bid into the market.”

What investors will be looking out in the coming days:

U.S. Secretary of State Rex Tillerson will today [Macau time] attend the Group of Seven gathering in Italy and next week meet with Russian counterpart Sergei Lavrov in Moscow. Argentina, Brazil, Canada, Chile and South Korea are among countries setting interest rates next week. U.S. banks will start reporting first-quarter earnings, led by Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co.

Stocks – The S&P 500 fell 0.1 percent to 2,355.58 as of 4 p.m. in New York. Futures fell as much as 0.7 percent in the hour after the attack in Syria. The CBOE Volatility Index rose 3 percent, paring a gain that topped 6 percent. The Stoxx Europe 600 Index added 0.1 percent. Volatility measures from Hong Kong to Europe increased.

Currencies – The Bloomberg Dollar Spot Index advanced 0.3 percent, rebounding from earlier losses as it heads for a weekly advance of 0.6 percent. The ruble dropped 1.5 percent. The currency has been trading near the highest since July 2015. President Vladimir Putin believes the U.S. airstrikes caused “considerable damage” to relations with Russia, a Kremlin spokesman said. The yen weakened 0.4 percent to 111.198 after erasing gains of as much as 0.6 percent. The euro slipped 0.3 percent, the British pound dropped 0.6 percent. South Africa’s rand touched the weakest level this year after Fitch Ratings became the second company to cut the country’s credit assessment to junk. It traded at 13.809 per dollar, lower by 0.4 percent.

Bonds – The yield on 10-year Treasuries rose four basis points to 2.38 percent after falling as low as 2.28 percent. The yield on the 10-year German benchmark fell four basis points to 0.23 percent.

Commodities – West Texas Intermediate crude added 1 percent to settle at USD52.245, after touching the highest in a month. Oil rose about 3 percent for the week. Gold futures rose 0.3 percent to $1,256.90. The metal climbed more than 1 percent earlier in the session to the highest since November, following two days of declines.

Asia – Japan’s Topix index climbed 0.7 percent, rebounding after erasing a rally of as much as 1.2 percent during the morning session. The Shanghai Composite Index rose 0.2 percent, giving it a 2 percent gain for the holiday-
shortened week. Bloomberg