As London/European traders head for the exits, the major European stock indices are closing mostly lower. Germany’s DAX was the notable exception, gaining 0.51%, while France, the UK, Spain and Italy all finished modestly in the red.
The moves come as European benchmark yields rose sharply across the board, adding some pressure to equities.
European closing levels:
- German DAX: +0.51% at 26,432.87
- France CAC 40: -0.16% at 8,636.81
- UK FTSE 100: -0.21% at 10,750.12
- Spain Ibex: -0.06% at 20,156.61
- Italy FTSE MIB: -0.20% at 53,583.60
Europeans yields move higher
In the European debt market, benchmark 10-year yields moved sharply higher:
- Germany: 3.205%, +7.1 basis points
- France: 4.048%, +9.9 basis points
- UK: 5.042%, +9.0 basis points
- Spain: 3.652%, +8.4 basis points
- Italy: 3.990%, +9.3 basis points
US stocks are lower
As European traders leave for the day, the major U.S. indices are mostly lower after earlier gains faded. The S&P and Nasdaq are pulling back after the S&P reached another record level this week.
- Dow Industrial Average: -0.27% at 53,700.36
- S&P 500: -0.20% at 7,783.06
- Nasdaq Composite: -0.44% at 26,684.76
- Russell 2000: +0.24% at 3,060.04
- Nasdaq 100: -0.40% at 29,963.16
US yields are higher after trading lower earlier.
U.S. Treasury yields are also moving higher, with the largest increases at the long end of the curve. The move is steepening the yield curve despite the softer U.S. dollar. The rise in longer-term yields has been a notable feature of today’s trading.
- 2-year: 4.150%, +1.0 basis point
- 5-year: 4.346%, +3.3 basis points
- 10-year: 4.686%, +4.5 basis points
- 30-year: 5.269%, +5.8 basis points
The USD is moving lower despite the yields moving higher.
The U.S. dollar is lower against all of the major currencies, with the biggest decline coming against the New Zealand dollar. The NZD is up 0.75% versus the greenback, while the AUD and GBP are both up about 0.51%. The euro is up 0.46%.
The dollar is also lower against the yen, with USDJPY down 0.19%. USDCAD is down 0.42%, while USDCHF is lower by 0.29%. The broad dollar weakness comes despite the move higher in Treasury yields.
Crude oil is higher in a fairly narrow range.
Crude oil is trading modestly higher, up $0.43 at $81.68. The price has seen a wide intraday range, reaching a high of $82.99 and a low of $80.71 before settling near the middle of that range as European traders exit.
US economic data was softer than expectations
U.S. economic data came in softer than expected, adding to concerns about the strength of the consumer and helping pressure the U.S. dollar.
- July retail sales fell 0.6%, well below the +0.1% expected. Ex-autos sales declined 0.3% versus +0.2% expected, while the important control group fell 0.4% versus a +0.3% forecast. Motor vehicles and non-store retailers were among the biggest drags.
- University of Michigan consumer sentiment fell to 51.0 in the preliminary August reading, below the 54.5 expected and down from 55.2 in July. Both current conditions and expectations weakened.
- Inflation expectations remained elevated, with the 1-year measure rising to 4.3% from 4.2%, while the 5-year measure held at 3.3%.
The combination of weak retail sales and softer consumer sentiment raises some questions about consumer momentum heading deeper into the third quarter and is the catalyst for the stocks despite the chance of a fed tightening down to 30% for September. .
This article was written by Greg Michalowski at investinglive.com.