Stocks Struggle as Bond Yields Fall; Dollar Gains

European Stock Markets

Stocks in Europe struggled for direction after a positive session in Asia as investors debate the outlook for central bank policy normalization. Bonds across the euro region gained with Treasuries, while the dollar recovered some of Thursday’s drop.

The Stoxx Europe 600 Index was little changed as car maker declines offset gains in telecom shares.

The MSCI Asia Pacific Index rose, underpinned by gains in Tokyo, Hong Kong, Sydney and Seoul equity markets. The dollar strengthened against most major currencies and ten-year U.S. yields ticked lower, though still near their highest since 2014. Bond yields dropped across the euro region and the common currency slipped after minutes from the European Central Bank showed officials continue to lay the groundwork for a shift in policy language.

Interest-rate-hike jitters returned to markets after minutes of the Federal Reserve’s January meeting indicated the U.S. central bank is confident the economy is strengthening. Subsequent data confirmed that view, but also brought signs of rising inflation, cutting against the long-held view that it will remain short of policy makers’ targets.

Elsewhere, Bitcoin fell below $10,000. The pound inched lower, and is headed for a third weekly decline since January, as U.K. Prime Minister Theresa May locks down her ministers in a bid to agree on what kind of post-Brexit trade deal they want from the EU. Terminal users can read more in our markets blog. Here are some key events scheduled for the remainder of the week:

The Federal Reserve officials John Williams speaks in Los Angeles on the outlook for the U.S. economy, while Bill Dudley and Eric Rosengren are participating in a panel discussion in Chicago.

The Fed is publishing its semi-annual monetary policy report to Congress, before Chairman Jerome Powell’s testimony before House and Senate committees next week

ECB board member Benoit Coeure participates in a panel discussion with the Fed’s Loretta Mester in New York

Euro-region consumer prices data may show inflation ticking lower to 1.3 percent in January from 1.4 percent, according to the median estimate in a Bloomberg survey

Stocks

• The Stoxx Europe 600 Index increased less than 0.05 percent as of 8:10 a.m. London time.
• The U.K.’s FTSE 100 Index fell 0.1 percent to the lowest in more than a week.
• Germany’s DAX Index gained 0.1 percent.
• Futures on the S&P 500 Index climbed 0.4 percent to the highest in a week.
• The MSCI Asia Pacific Index advanced 0.9 percent.
• Japan’s Topix index rose 0.8 percent, Hong Kong’s Hang Seng Index climbed 1 percent, and South Korea’s Kospi was up 1.5 percent.
• Australia’s S&P/ASX 200 Index gained 0.8 percent.

Currencies

• The Bloomberg Dollar Spot Index advanced 0.1 percent.
• The euro decreased 0.3 percent to $1.2292.
• The British pound dipped 0.1 percent to $1.3943.
• The Japanese yen declined 0.1 percent to 106.90 per dollar.

Bonds

• The yield on 10-year Treasuries declined one basis point to 2.91 percent.
• Germany’s 10-year yield fell two basis points to 0.70 percent, the lowest in four weeks on the largest fall in a week.
• Britain’s 10-year yield decreased three basis points to 1.546 percent, the lowest in more than three weeks.
• Japan’s 10-year yield dipped less than one basis point to 0.053 percent, the lowest in more than seven weeks.

Commodities

• West Texas Intermediate crude declined 0.1 percent to $62.68 a barrel.
• Gold declined 0.4 percent to $1,327.29 an ounce.