Dollar Dips as Fed Hike Bets Ease, Treasuries Gain: Markets Wrap
(Bloomberg) — The dollar remained under pressure after weak US economic data reduced bets for the Federal Reserve to raise interest rates next month.
A Bloomberg gauge of the currency’s strength slipped 0.1%, hovering around levels last seen in May. The dollar was weaker against all of its Group-of-10 peers after Friday data showed US retail sales fell in July by the most in more than a year as consumers pulled back on purchases.
Swaps traders see around a one-in-four chance that the Fed will raise interest rates next month. That’s down from a 50% chance only a week ago. Treasuries rose across the curve. The yield on the rate-sensitive 2-year fell two basis points to 4.15%, while that on the benchmark 10-year eased one basis point to 4.68%.
Elsewhere, oil erased earlier gains as traders looked for the next catalyst to set direction, with renewed Israeli attacks on Lebanon and the prospect of fresh US sanctions on Iran adding to geopolitical uncertainty. Brent crude traded around $88.55 a barrel, having earlier climbed to almost $89. Asian stocks were little changed, with South Korea out for a holiday.
Monday’s cautious moves came as investors watched for efforts to reopen the Strait of Hormuz, which may weigh on oil after it jumped almost 6% last week. With stocks near record highs on a revival in the artificial intelligence trade, attention remained on the Middle East for the next market catalyst after the weak US consumer data tempered optimism after back-to-back benign inflation readings.
“The most significant headwind for the market currently remains geopolitical uncertainty, which continues to weigh on market sentiment here and there – although the relative lack of military activity in the Middle East has lowered volatility at the margins,” said Kyle Rodda, a senior analyst at Capital.com.
In geopolitical news, Israel said it killed 11 people, including a senior Hezbollah commander, in strikes on southern Lebanon, one of the deadliest days of fighting in months.
The fighting on the periphery of the Iran war may further complicate what appears to be deadlocked negotiations between Washington and Tehran.
The sides are poised to arrive at the formal end of their own ceasefire agreement with no apparent path forward on the Strait of Hormuz and with the US readying an “economic isolation” plan.
In other corners of the market, futures contracts for the S&P 500 and the Nasdaq 100 Index advanced, after the underlying gauges slipped Friday on signs of a slowdown in US consumer spending.
Gold inched up 0.4% to about $4,390 an ounce.
Elsewhere, the yen traded stronger as Japan’s economic growth unexpectedly slowed in the three months through June as capital spending continued to slump.
On Friday, US equities slipped from a record as consumer sentiment slid more than expected and retail sales dropped the most in more than a year.
Focus will also be on the sale of 20-year US government bonds this week as it tests investor appetite for long-term debt following a few record-breaking auctions.
A slew of China data, including retail sales and industrial production, will be in focus Monday. Economists expect consumer spending to have picked up slightly in July, while factory output may have slowed, according to Bloomberg surveys.
China’s “macro momentum continues to deteriorate” as credit growth has slowed and inflation remains weak, Wee Khoon Chong, a strategist at BNY wrote in a note to clients. “July activity data are likely to reinforce the slowdown, with retail sales and high-tech investment the key areas to watch for resilience.”
Corporate News:
Stripe Inc. has finalized an agreement to acquire OpenRouter Inc. for more than $7 billion, according to people familiar with the matter. Anthropic PBC is telling prospective investors its second-quarter revenue jumped at least 14-fold versus the same period a year ago, according to documents seen by Bloomberg News. New Zealand infant formula supplier a2 Milk expects only a gradual recovery from supply chain disruptions that impacted its China sales earlier this year. Alibaba Group Holding’s open-weight models have accumulated more than 3 billion global downloads in the past six months, eclipsing Meta Platforms Inc., Alphabet Inc. and domestic peers to become the world’s No. 1 artificial-intelligence model. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 9:28 a.m. Tokyo time Hang Seng futures rose 0.6% Japan’s Topix fell 0.3% Australia’s S&P/ASX 200 fell 0.3% Euro Stoxx 50 futures were little changed Currencies
The Bloomberg Dollar Spot Index fell 0.1% The euro was little changed at $1.1579 The Japanese yen rose 0.2% to 159.07 per dollar The offshore yuan was little changed at 6.7414 per dollar The Australian dollar rose 0.1% to $0.7094 Cryptocurrencies
Bitcoin fell 0.4% to $62,769.02 Ether fell 0.4% to $1,873.15 Bonds
The yield on 10-year Treasuries declined one basis point to 4.68% Japan’s 10-year yield advanced 1.5 basis points to 2.890% Australia’s 10-year yield advanced four basis points to 5.05% Commodities
West Texas Intermediate crude fell 0.3% to $82.14 a barrel Spot gold rose 0.3% to $4,390.17 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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