World stock markets and the US dollar fell yesterday while US Treasury yields rose amid investor caution ahead of a key speech by US President Donald Trump.
The dollar fell ahead of Mr Trump’s State of the Union address, during which he is expected to unveil details on pro-growth policies including infrastructure spending.
“There is setting up for what people expect might be at least a focus on things like fiscal stimulus and infrastructure spending of some kind, that might actually boost risk and cause yields to rise,” said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
US 10-year Treasury notes were last down 7/32 in price to yield 2.342 per cent, from a yield of 2.317 per cent late Friday. Two-year notes US2YT=RR were last down 1/32 in price to yield 1.169 per cent, from a yield of 1.145 per cent late Friday.
The dollar was down 0.3 per cent against a basket of major currencies after Mr Trump said yesterday that tax reform details would not be revealed until after the administration’s proposal on healthcare.
Investors had hoped for “more clarity around tax reform sooner rather than later” said Bipan Rai, senior macroeconomic strategist at CIBC Capital Markets in Toronto.
At 11:25 a.m. ET, the Dow Jones Industrial Average was down 5.62 points, or 0.03 per cent, at 20,816.14, the S&P 500 shed 0.2 points, or 0.01 per cent, to 2,367.14, while the Nasdaq Composite added 1.63 points, or 0.03 per cent, to 5,846.93.
Europe’s benchmark index of leading 300 shares fell 0.1 per cent.
MSCI’s benchmark world stock index slipped 0.03 per cent after it hit a record high Thursday.
A proposed €29 billion merger between the London Stock Exchange and Deutsche Boerse to create Europe’s biggest stock exchange looked dead in the water due to an inability to meet European antitrust demands. Shares in both companies fell.
The London Stock Exchange fell as much as three per cent while Deutsche Boerse fell as much as four per cent.
“The regulatory hurdles were always a risk, and with Brexit, there are additional hurdles to clear that seem close to insurmountable now,” said Neil Wilson, senior market analyst at ETX Capital.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.24 per cent, while Japan’s Nikkei fell 0.9 per cent for its lowest close since February 9 on concerns that a stronger yen would crimp corporate earnings.
The Dow Jones Industrial Average scaled its 11th consecutive record high on Friday, the longest such run since 1987, leading some to suggest it could be prone fora correction.
In commodities, Brent crude was up 0.3 per cent at $56.14 per barrel yesterday while US West Texas Intermediate was up 0.4 per cent at $54.20 per barrel as a global supply glut appeared to ease.