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Dollar Up Before Fischer as Stocks Snap Losing Streak

Financial_Markets

The dollar strengthened versus most of its peers and U.S. Treasuries retreated as investors assessed the outlook for U.S. interest rates ahead of remarks by Federal Reserve Vice Chairman Stanley Fischer. Global equities rose for the first time in a week.

The Bloomberg Dollar Spot Index climbed to a three-week high as the greenback appreciated for a fifth day versus the yen, the longest winning streak since March. Ten-year U.S. Treasuries retreated, after rallying in the last session for the first time in a week. Benchmark stock gauges in Asia and Europe advanced, while S&P 500 Index futures were little changed after the measure closed within 0.5 percent of a record. Crude hovered above $47 a barrel, while copper held near a two-month low.

Speculation the U.S. will raise interest rates this year surged over the past two weeks, halting a global equities rally and boosting the greenback, as Fed officials including Chair Janet Yellen said the case for a hike is getting stronger. Fischer is due to speak Tuesday in a Bloomberg Television interview, after saying on Friday that a September move is possible. A tightening risks destabilizing financial markets as central banks in Europe and Japan use unprecedented stimulus to support their economies.

“Expectations for a Fed rate increase are still driving the markets, as players await Fischer’s comments,” said Yuji Saito, head of the foreign-exchange department at Credit Agricole SA in Tokyo.

Japan’s household spending fell in July from a year earlier, while the jobless rate was the lowest since 1995, data showed Tuesday. Gauges of consumer confidence in the euro area and the U.S. are also scheduled, along with a measure of American home prices.

Currencies

The Bloomberg Dollar Spot Index climbed 0.2 percent as of 8:17 a.m. London time, with the U.S. currency strengthening 0.2 percent against the euro and 0.4 percent versus the yen, which was trading at 102.34 per dollar.

Fed funds futures ended Monday indicating a 36 percent chance that the Fed will raise rates in September, up from 24 percent a week earlier, and Fischer has said U.S. payrolls figures on Friday will be key to the central bank’s decision making. The report is projected to show employers added 180,000 jobs this month, following a gain of 255,000 in July.

The risk that the yen will resume its climb to 100 per dollar is “likely to be limited ahead of the U.S. jobs data on Friday,” Masafumi Yamamoto, the chief currency strategist at Mizuho Securities Co. in Tokyo, wrote in a note to clients. “A strong number would refuel expectations for a September rate hike and support the dollar.”

South Korea’s won rose 0.5 percent versus the dollar, the best performance among 16 major currencies. That followed a 1 percent decline in the last session, when it was the worst performer.

Stocks

The MSCI All Country World Index gained 0.1 percent, snapping a four-day losing streak. The Stoxx Europe 600 Index rose 0.2 percent, even as the U.K.’s FTSE 100 Index lost 0.2 percent as trading resumed following a holiday.

The MSCI Asia Pacific Index advanced 0.2 percent. Benchmarks in Hong Kong and India were the region’s best performers, climbing about 1 percent. Japan’s Topix index closed little changed following a 2 percent jump in the last session.

China Southern Airlines Co., Asia’s biggest carrier by passengers, tumbled as much as 8.3 percent in Hong Kong after reporting a 10 percent slide in first-half net income. Flag carrier Air China Ltd. and China Eastern Airlines Corp. will report earnings on Tuesday, as will Industrial & Commercial Bank of China Ltd. and Bank of China Ltd.

Futures on the S&P 500 fell less than 0.1 percent, after the U.S. benchmark added 0.5 percent in the last session. With the American quarterly earnings season all but complete, almost 80 percent of companies included in the measure beat profit estimates, and 55 percent topped sales expectations. Analysts project net income at the gauge’s members will decline 1.3 percent in the third quarter, which would mark a sixth straight contraction.

Bonds

The yield on U.S. government debt due in a decade increased by three basis points to 1.59 percent, after dropping seven basis points on Monday. The rate on two-year notes increased by one basis point to 0.82 percent.

The Fed is “likely to tighten in September, at least as long as the jobs number comes in OK,” Michael Pond, head of global inflation market strategy at Barclays Capital Inc. in New York, said on Bloomberg Television. “Hawkish Fed rhetoric has certainly increased recently. It’ll take a decent number, like 200,000, for them to go.”

Commodities

West Texas Intermediate crude was up 0.3 percent at $47.14 a barrel. U.S. stockpiles probably increased by 1.5 million barrels last week, according to analysts surveyed by Bloomberg before official data due Wednesday. Oil explorers discovered just 2.7 billion barrels of new supply in 2015, the smallest amount since 1947, and this year’s tally is on track to be even smaller, according to figures from consulting firm Wood Mackenzie Ltd.

Copper was little changed in London, after earlier climbing as much as 0.7 percent after data showed U.S. consumer spending rose for a fourth month in July. Nickel added 0.2 percent.

“The overnight U.S. news is lifting market sentiment a bit,” Ji Xianfei, an analyst with Guotai Junan Futures Ltd., said by phone from Shanghai, “Though for copper, it still looks weak in its fundamentals and may hover around the trough.”

Gold fell 0.2 percent to about $1,321 an ounce, after snapping a six-day losing streak in the last session. Central banks, the biggest holders of bullion, cut their purchases by 40 percent from a year earlier in the last quarter to the lowest since 2011, World Gold Council figures compiled by Bloomberg show.

Source: Bloomberg