Dollar Gains as Korea Fears, Irma Abate; Oil Rises: Markets Wrap

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The dollar gained, Treasuries retreated and stocks advanced as an appetite for risk returned to global markets after an anticipated North Korean missile test failed to materialize and Hurricane Irma struck the U.S. with less force than feared. Gold, the yen and Swiss franc all fell.

Bloomberg’s dollar index was headed for the first increase in eight days, while U.S. stock futures rose and Treasuries slipped after Irma weakened and shifted direction to spare Miami a direct hit. The Stoxx Europe 600 Index jumped the most in more than a week as all the region’s major stock gauges advanced and almost every sector gained. Earlier, equities across Asia traded in the green. Oil advanced as Gulf Coast refining capacity continued to recover after getting hit by Harvey.

Pyongyang warned of retaliation if the UN Security Council approves harsher sanctions over its recent nuclear test in a vote on Monday. The regime “is closely following the moves of the U.S. with vigilance,” the North’s state-run Korean Central News Agency said Monday.

“The better risk environment has seen Treasury yields move higher while the yen retreated,” wrote Chris Scicluna, head of economic research at Daiwa Capital Markets in London in a client note. Hurricane Irma appears “not to be quite as catastrophic as had been feared last week” and “thankfully there was no bad weekend news out of North Korea either,” he said.

Meanwhile, Federal Reserve speakers are now in a blackout period before next week’s policy meeting, so investors are likely to devote much of their attention to assessing the impact of natural disasters on U.S. growth. While the most dire predictions about Irma seem to have been avoided, the storm converted streets into rivers, hammered Caribbean islands and the Florida Keys with deadly fury, and left at least 4.7 million without power and millions temporarily displaced.

Terminal subscribers can read more on our Markets Live blog.

The key events this week:

  • U.S. retail sales and inflation data are due this week.
  • Brexit Secretary David Davis warned U.K. lawmakers that blocking the Repeal Bill could lead to a “chaotic” departure from the EU. The measure goes to a vote on Monday.
  • The Frankfurt Motor Show is underway.
  • The Bank of England will almost certainly leave policy unchanged on Thursday, even though the U.K. inflation reading two days earlier may show a pickup.
  • Also due this week, India’s trade surplus and China’s August industrial production, retail sales and fixed-asset investment.
  • Australia releases jobs data on Thursday.

Here are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index jumped 0.9 percent as of 9:57 a.m. London time, the highest in almost four weeks.
  • Futures on the S&P 500 Index increased 0.5 percent to the highest in five weeks on a closing basis.
  • The MSCI All-Country World Index increased 0.3 percent to the highest on record with the largest climb in more than a week.
  • The MSCI Emerging Market Index increased 0.4 percent to the highest in about three years.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.2 percent, the first advance in more than a week.
  • The euro dipped 0.1 percent to $1.2018, the first retreat in more than a week.
  • The British pound decreased 0.1 percent to $1.319, the first retreat in a week.

Bonds

  • The yield on 10-year Treasuries gained three basis points to 2.09 percent.
  • Germany’s 10-year yield climbed one basis point to 0.33 percent.
  • Britain’s 10-year yield increased three basis points to 1.018 percent.

Commodities

  • Gold sank 0.7 percent to $1,337.62 an ounce, the biggest dip in almost four weeks.
  • West Texas Intermediate crude climbed 0.5 percent to $47.72 a barrel.

Asia

  • The Topix index advanced 1.2 percent at the close in Tokyo, its steepest advance since early June. South Korea’s Kospi index rose 0.7 percent as did the S&P/ASX 200 Index in Sydney. Hong Kong’s Hang Seng Index rose 1 percent, while gauges in China fluctuated.
  • The MSCI Asia-Pacific Index jumped 0.6 percent to hit the highest since December 2007.
  • The Japanese yen sank 0.6 percent to 108.44 per dollar, the biggest dip in almost four weeks.

— With assistance by Adam Haigh, Min Jeong Lee, Andreea Papuc, and Sid Verma

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