The dollar looked poised to finish its best weekly gain of the year with a whimper, fluctuating as investors continued to weigh the prospects for tax cuts in the world’s largest economy. European government bonds rebounded from the recent selloff.
Equities in the region drifted even as they headed for the best month this year, after stocks in Asia had earlier followed the S&P 500 higher. Treasuries were steady after a selloff that saw yields jump 18 basis points this week, the most since Donald Trump’s U.S. election victory in November. Emerging-market assets rallied, with stocks rising and most currencies strengthening against the greenback.
Trump’s tax plan, which still needs approval from Congress, currently lacks detail, leaving investors guessing which parts of the package will be prioritized. That appears to have persuaded them to pause some of the recent reflation trades. Though with the chances of higher U.S. interest rates by the end of the year now at about 65 percent, they have driven equities higher and taken money out of gold, which was on track for its worst month this year.
Meanwhile, data out of Europe underscored the region’s economic recovery. German unemployment fell to a record low in September, providing encouragement for the European Central Bank as it contemplates reducing asset purchases in coming months. Euro-zone inflation undershot estimates, though not by much. The U.K.’s benchmark stock index was buoyed by data showing that British consumers are in better shape than previously thought.
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What to watch out for prior to the weekend:
- The U.S. Commerce Department reports personal income and spending data for August. The figures are likely to begin showing distortions related to Hurricanes Harvey and Irma lasting for a few months.
- The core PCE deflator, the Fed’s preferred inflation gauge, probably stuck at 1.4 percent.
- South Korea’s markets will be closed next week for a holiday along with China.
- Philadephia Fed President Pat Harker is speaking on Friday.
Here are the main moves in markets:
- The Stoxx Europe 600 Index decreased less than 0.05 percent as of 11:04 a.m. London time, the first retreat in more than a week. The gauge is up 1.9 percent this quarter.
- The U.K.’s FTSE 100 Index jumped 0.6 percent to the highest in almost two weeks.
- The MSCI All-Country World Index gained 0.1 percent.
- The MSCI Emerging Market Index jumped 0.6 percent, the first advance in more than a week.
- Futures on the S&P 500 Index dipped less than 0.05 percent.
- The Bloomberg Dollar Spot Index decreased less than 0.05 percent.
- The euro gained 0.1 percent to $1.1802.
- The British pound sank 0.5 percent to $1.3372, the weakest in almost two weeks.
- The MSCI Emerging Markets Currency Index gained 0.2 percent, the first advance in a week.
- The yield on 10-year Treasuries climbed less than one basis point to 2.31 percent.
- Germany’s 10-year yield declined three basis points to 0.45 percent.
- Britain’s 10-year yield declined two basis points to 1.33 percent, the largest drop in almost three weeks.
- West Texas Intermediate crude was unchanged at $51.56 a barrel.
- Gold increased 0.1 percent to $1,288.15 an ounce.
- The Topix index fell 0.1 percent at the close. The Kospi index in Seoul climbed 0.9 percent and Australia’s S&P/ASX 200 Index added 0.2 percent.
- Hong Kong’s Hang Seng Index was up 0.4 percent while Chinese stocks also advanced.
- The MSCI Asia Pacific Index advanced 0.3 percent after falling for six days in a row before Friday. It is set to complete its third quarterly gain, the best run since the end of the first quarter 2013.
- The Japanese yen dipped 0.1 percent to 112.48 per dollar.
— With assistance by Adam Haigh