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(Bloomberg) -- The cautious tone that swept into markets in recent days persisted, as equities fell around the world and bonds advanced with gold. The latest inflation data in the U.S. did little to change views on Federal Reserve policy.

Futures on the S&P 500 Index signaled the gauge will fall for the fourth time in five days, as new obstacles emerged to the U.S. overhauling taxes. The dollar remained lower even after core inflation picked up for the first time since January. Retail sales data signaled strong demand from consumers, but bonds remained higher, with the flattest American yield curve in a decade raising concern that growth will slow. 

Data out of China this week has fueled speculation the second-largest economy is sputtering, weighing on equities. European stocks declined a seventh day and Japan’s Topix index retreated for a fifth session, both in their longest losing streaks in a year. Mining and oil-related companies set the tone, with the Bloomberg Commodities Index in its longest slide since June. WTI crude declined through $55 a barrel after industry data showed U.S. stockpiles unexpectedly rose last week and as Russia was said to waver on extending output cuts.

The pound erased gains after the U.K. labor market showed weakness. Meanwhile a selloff in high-yield credit continued, with an index of sub-investment grade European credit default swaps rising 6.5 basis points.

“So far we don’t see that much disruption in sentiment, so I think we are just taking a bit of froth off the top of the market at the moment,” Michael Metcalfe, global head of macro strategy at State Street Global Markets, said on Bloomberg TV. “It would be dangerous to say this is the unwinding of a bubble -- the fact that it’s being led by Japan actually tells you that, because there isn’t a valuation case to sell Japanese stocks.”

Amid the global equity pullback, Morgan Stanley advised staying overweight stocks and avoiding the temptation to sell even as valuations appear stretched. Current indicators used by the New York-based bank’s cross-asset strategy team are showing strong macro-economic data favoring a tilt to shares, with low allocation to high-yield credit.

Terminal users can read more in our Markets Live blog.

Here are some key events investors are watching this week:

  • Bank of England officials address the bank’s future on Thursday, while European Central Bank chief Mario Draghi speaks Friday.
  • A string of Fed appearances may further illuminate the FOMC’s commitment to a December hike.
  • U.S. CPI and retail sales data will be released Wednesday morning.

And these are the main moves in markets:


  • The Stoxx Europe 600 Index dipped 0.9 percent as of 8:37 a.m. New York time, hitting the lowest in two months with its seventh consecutive decline.
  • The MSCI All-Country World Index declined 0.2 percent, reaching the lowest in almost three weeks on its fifth consecutive decline.
  • The U.K.’s FTSE 100 Index dipped 0.5 percent, hitting the lowest in almost seven weeks with its fifth consecutive decline.
  • Germany’s DAX Index dipped 0.9 percent, reaching the lowest in more than six weeks on its fifth consecutive decline.
  • The MSCI Emerging Market Index fell 0.4 percent, hitting the lowest in almost three weeks with its fifth consecutive decline.
  • Futures on the S&P 500 Index sank 0.4 percent to the lowest in almost three weeks on the biggest dip in 10 weeks.


  • The Bloomberg Dollar Spot Index fell 0.2 percent to the lowest in almost four weeks.
  • The euro climbed 0.3 percent to $1.1835, reaching the strongest in almost four weeks on its sixth consecutive advance.
  • The British pound declined less than 0.05 percent to $1.3164.


  • The yield on 10-year Treasuries declined three basis points to 2.34 percent, the lowest in a week.
  • Germany’s 10-year yield dipped four basis points to 0.36 percent, the lowest in a week on the biggest decrease in almost three weeks.
  • Britain’s 10-year yield fell five basis points to 1.273 percent, the largest drop in almost two weeks.


  • Gold advanced 0.4 percent to $1,285.29 an ounce, the highest in almost four weeks on the biggest gain in a week.
  • West Texas Intermediate crude fell 1.1 percent to $55.10 a barrel, the lowest in almost two weeks.


  • The Topix closed 2 percent lower in Tokyo to seal its longest streak of losses since September 2016. The Nikkei 225 Stock Average was down 1.6 percent.
  • Australia’s S&P/ASX 200 Index declined 0.6 percent and the Kospi index in Seoul was down 0.3 percent.
  • Hong Kong’s Hang Seng Index fell 1 percent and the Shanghai Composite Index was down 0.8 percent.
  • The Japanese yen climbed 0.6 percent to 112.78 per dollar, the strongest in almost four weeks on the biggest increase in almost 10 weeks.

--With assistance from Andreea Papuc and Cormac Mullen

To contact the reporters on this story: Samuel Potter in London at spotter33@bloomberg.net, Todd White in Madrid at twhite2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter

©2017 Bloomberg L.P.

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