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Stocks Mixed as Tech Gains Offset Industrial Woes: Markets Wrap

  • Dollar at three-week high before Fed Chair’s House testimony
  •  Mexican peso slumps after minister quits; Treasuries slip

WT24 Desk

U.S. stocks fluctuated as markets braced for an onslaught of central bank news this week. The dollar strengthened to its highest level since mid-June and Treasuries slipped, Bloomberg reports.

The S&P 500 Index was little changed Tuesday, with industrial and consumer-staple stocks sliding, as investors absorb recent profit warnings and stand by for more clues on the path for U.S. monetary policy. Meanwhile, gains in the consumer-discretionary and tech sectors mostly offset decliners. Gold advanced, while the Mexican peso slid after the country’s finance minister announced his resignation.

Trading may stay choppy ahead of key testimony this week from Federal Reserve Chair Jerome Powell as observers assess prospects for easing following conflicting signals on the global economy. Stock and bond investors are struggling to find fresh reasons to chase this year’s rallies. An interest rate cut by the Fed this month is already priced and recent economic data has been mixed, making the path for future policy less clear.

“The Fed has to walk a really fine line here,” Jonathan Mackay, strategist at Schroder Fund Advisors, said on Bloomberg TV. “The market’s already priced in rate cuts — a 100% probability of a 25 basis-point cut by the end of this month — and what good does it do us? Financial conditions are already easy, so what boost do you get for the economy?”

The Stoxx Europe 600 Index closed lower after the world’s largest chemical company, BASF, slashed its 2019 earnings forecast, blaming global trade conflicts. Stocks reversed gains in Japan, fluctuated in South Korea and saw modest slides in Hong Kong and China. Italian bonds rose as the country took advantage of low borrowing costs to sell 50-year bonds.

Elsewhere, West Texas intermediate crude gained following a report that Russian output declined. Bitcoin extended Monday’s 11% jump. The pound weakened as economists predicted the U.K. economy likely shrank for the first time since 2012 in the second quarter.

Hong Kong’s dollar dipped as the city’s leader Carrie Lam said a controversial bill that would allow extraditions to China was “dead,” but stopped short of saying she’d withdraw the legislation after weeks of protests.

Here are some key events coming up:

  • Powell testifies before Congress on monetary policy and the state of the U.S. economy on Wednesday (the House of Representatives) and Thursday (the Senate).
  • Fed minutes are due on Wednesday, ECB minutes on Thursday.
  • A key measure of U.S. inflation — the core consumer price index, due Thursday — is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.
  • U.S. producer prices are due on Friday.

Here are the main moves in markets:

Stocks

  • The S&P 500 Index declined 0.1% as of 12:32 p.m. New York time.
  • The Stoxx Europe 600 Index sank 0.5% to the lowest in more than a week.
  • The U.K.’s FTSE 100 Index decreased 0.2%.
  • Germany’s DAX Index slid 0.9%, the biggest decrease in more than five weeks.
  • The MSCI Emerging Market Index fell 0.4%.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2% to its highest in three weeks.
  • The British pound fell 0.5% to $1.2451, the weakest in more than two years.
  • The euro decreased 0.1% to $1.1206, the weakest in three weeks.
  • The Japanese yen weakened 0.1% to 108.80 per dollar.
  • The Mexican peso dropped 1.3% to 19.1568 per dollar, the biggest tumble in over four weeks.

Bonds

  • The yield on 10-year Treasuries rose one basis point to 2.05%.
  • Germany’s 10-year yield increased one basis point to -0.35%, the highest in more than a week.
  • Britain’s 10-year yield rose one basis point to 0.72%.

Commodities

  • West Texas Intermediate crude gained 0.4% to $57.88 a barrel.
  • Gold rose 0.1% to $1,397.43 an ounce.

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