US stocks pared some early losses as markets await an onslaught of central bank news this week. The dollar strengthened to its highest level since mid-June and Treasuries slipped.
The S&P 500 Index declined, led lower by materials and utilities stocks, as investors absorb recent profit warnings and stand by for more clues on the path for US monetary policy. Drug stocks were a lonely bright spot, surging after a federal judge shot down a proposed Trump administration rule to force pharmaceutical companies to include the price of their medicines in advertisements. Gold dropped for a fourth day.
Trading may stay choppy ahead of key testimony 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.
Auto and chemical makers led the Stoxx Europe 600 Index 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 Russia’s output has declined. Bitcoin extended its 11 percent jump.
The pound weakened as economists predicted the UK 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.
Powell testifies before Congress on monetary policy and the state of the US economy on Wednesday (the House of Representatives) and onThursday (the Senate). Fed minutes are due on Wednesday, ECB minutes on Thursday.
A key measure of US inflation — the core consumer price index, due on Thursday — is expected to have increased 0.2 percent in June from the prior month, while the broader CPI is forecast to remain unchanged.
US producer prices are due on Friday.
The S&P 500 Index declined 0.2 percent in New York. The Stoxx Europe 600 Index sank 0.5 percent, the biggest slide in over a week. The UK’s FTSE 100 Index decreased 0.2 percent. Germany’s DAX Index slid 0.9 percent, the biggest decrease in more than five weeks. The MSCI Emerging Market Index dipped 0.4 percent to the lowest in almost three weeks.
The Bloomberg Dollar Spot Index rose 0.1 percent to its highest in three weeks. The British pound fell 0.3 percent to $1.2472, the weakest in more than two years.
The euro decreased less than 0.05 percent to $1.121, the weakest in three weeks. The Japanese yen weakened 0.1 percent to 108.78 per dollar.
The yield on 10-year Treasuries rose one basis point to 2.06 percent. Germany’s 10-year yield increased one basis point to -0.35 percent, the highest in more than a week. Britain’s 10-year yield rose two basis points to 0.737 percent.
West Texas Intermediate crude increased 0.1 percent to $57.72 a barrel.