The US dollar and crude oil rose yesterday, adding to recent trends, while stocks fell in a broad but shallow decline on Wall Street as home resales dropped sharply.
Contracts to buy previously owned US homes fell in November to their lowest level in nearly a year, a sign that rising interest rates could be weighing on the housing market. Despite the tick down in the 10-year US Treasury yield yesterday, the spread between the benchmark and 10-year German Bund yields touched its historic high.
On Wall Street, shares fell broadly with real estate posting the largest drop among S&P 500 sectors. The Dow Jones Industrial Average fell 53.27 points, or 0.27 per cent, to 19,891.77, the S&P 500 lost 13.04 points, or 0.57 per cent, to 2,255.84 and the Nasdaq Composite dropped 35.04 points, or 0.64 per cent, to 5,452.41.
The pan-European FTSEurofirst 300 index edged up 0.27 per cent, while MSCI’s gauge of stocks across the globe fell 0.32 per cent.
Emerging market stocks rose 0.65 per cent.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent while Japan’s Nikkei closed little changed.
The dollar also rose on continued bets that the Federal Reserve will have to raise rates next year to keep up with inflation and growth brought by a planned fiscal stimulus from the incoming Trump administration.
“This is just a continuation of the trend of dollar strength,” said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments. “People are trying to be aligned with the winning positions.”
The dollar index gained 0.51 per cent. The euro fell 0.71 per cent to $1.0381 and the pound dropped 0.42 per cent to $1.2218.
Eurozone bond yields fell across the board as concerns about the strength of a rescue plan for Italian banks and normal year-end caution pushed investors to the safety of government debt.
Germany’s 10-year yields hit their lowest in seven weeks at 0.181 per cent. That in turn widened the yield gap to US Treasuries, which act as the world’s benchmark borrowing rate. The spread was last at 235.25 basis points.
“It’s come from movement on both sides,” said Robert Tipp, investment strategist at Prudential.
The 10-year US Treasury yield hit a session low at 2.541 per cent. Benchmark 10-year notes last rose 5/32 in price to yield 2.5468 per cent.
Oil prices edged up for a fourth consecutive session, edging close to their highest levels since mid-2015, ahead of US oil inventory figures and as the market awaits evidence of OPEC supply reductions in the new year.
US crude last rose 0.5 per cent to $54.17 a barrel and Brent traded at $56.38, up 0.5 per cent on the day.