Stocks Drop as Bonds Gain; Sterling Under Pressure: Markets Wrap

Frankfurt (Nov 13)  European stocks retreated and U.S. equity futures pointed to a lower opening as a risk-off tone took hold of global markets. Treasuries, the dollar and European government bonds all climbed, while the pound weakened as British Prime Minister Theresa May found herself under renewed pressure.

Sterling fell against all its main G-10 peers following a report that as many as 40 Conservative lawmakers have agreed to sign a letter of no confidence in May, eight short of the number required to trigger a leadership challenge. The currency’s weakness lent support to the FTSE 100 Index, but even that erased gains as most European gauges slipped and the Stoxx 600 Index dropped. Earlier, equities in Tokyo deepened a decline toward the close of the session amid a red day across Asian equities, though Chinese shares bucked the slide. Bitcoin clawed back most of its losses after a major intraday slump.

It looks like being a busy week for investors. U.S. inflation and growth numbers are on the docket, and they could be key to the Federal Reserve’s determination to lift rates next month. Talks on American tax legislation may also play into market thinking; pessimism over the likelihood of successful reforms helped drag global equities down from this month’s record high late last week. Measures of equity-market volatility have risen, albeit from low levels.

Meanwhile, the threat to May’s leadership comes at a sensitive time for the U.K. leader. The opposition Labour Party accused her of lacking the support within her Conservative Party to deliver the Brexit transition period she’s proposed. In a week that also features a slew of Bank of England members speaking and updates on U.K. inflation, the labor market and retail sales, British assets could be in for a choppy ride.

Elsewhere, gold and most industrial metals rose, and West Texas oil fluctuated.

Terminal users can read more in our Markets Live blog.

Here are some key events investors are watching this week:

•President Donald Trump continues on the final leg of his tour around Asia.

•This week’s data include GDP reports for Japan, Germany, Italy and the euro area, CPI in the U.S., U.K. and Spain, retail sales and industrial output in China, along with Aussie jobs and wages. 

•It’s also a busy week for central bank speakers, with Mario Draghi, Janet Yellen, Mark Carney and Haruhiko Kuroda appearing at an ECB conference on monetary policy communication. BOE officials address the bank’s future on Thursday, while Draghi speaks a second time Friday. A string of Fed appearances may further illuminate the FOMC’s commitment to a December hike.

•OPEC publishes its monthly market report Monday, followed by the IEA’s Tuesday.

•Oil executives are gathering in Abu Dhabi to jostle for access to the Emirate’s oil riches.

•More details about PDVSA’s bond payments may surface when Venezuela hosts creditors in Caracas at 2 p.m. local time on Monday.

Bloomberg

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