European bonds fell on signs inflation was quickening in Germany and equities retreated. The dollar weakened earlier as Donald Trump’s order halting some immigration reverberated around the world.
Government debt in the periphery was hardest hit, with yields in Italy and Portugal rising after consumer prices soared in Saxony as markets prepare for a busy week of central bank meetings. Stocks in Europe, Japan and Australia dropped with U.S. futures. The dollar pared an earlier decline and gold erased gains after Trump’s limits on immigration from seven predominantly Muslim nations sparked a knee-jerk risk-off reaction in Asia hours. The rand led declines in emerging markets currencies.
Faster-than-expected price growth prompted a sell-off in bonds on bets inflation of more than 2 percent in some parts of Germany will give the European Central Bank leeway to brake monetary stimulus sooner. Meanwhile, Trump’s immigration ban gave cause for concern that he may follow through with isolationist policies touted on the campaign trail.
“We’re hearing all the bad stuff about travel bans and tarriffs, and we’re not hearing a lot of good stuff about fiscal stimulus,” Trevor Greetham, head of multi-asset investments at Royal London Asset Management Ltd. said in an interview with Bloomberg Television. “If we sense any backtracking on the fiscal stimulus side of things, the markets will be more concerned.”
Here’s what’s coming up this week:
- The Federal Reserve holds a policy meeting on Feb. 1 and the Bank of Japan convenes this week. Neither is expected to change lending rates, though the Fed’s statement will be parsed for any reading on Trump’s impact on the world’s largest economy.
- Apple Inc., Facebook Inc. and Amazon.com Inc. are among the major U.S. companies due to report results. Of the 219 S&P 500 names to report so far, 73 percent have topped profit estimates. Japan will see earnings from heavy hitters including Sony Corp. and Honda Motor Co.
- The first U.S. jobs report of the year is due on Feb. 3., while China manufacturing and services industry data are scheduled for Feb. 1.
- The Stoxx Europe 600 Index fell 0.6 percent at 7:40 a.m. in New York. Insurers and energy shares led declines.
- Vodafone Group Plc led a gauge of telecommunications firms higher as it rose 2.5 percent after saying it’s in talks to merge its Indian unit with Idea Cellular Ltd. in a deal that would create the country’s largest cellular carrier.
- S&P 500 Index futures expiring in March declined 0.3 percent.
- The Bloomberg Dollar Spot Index was little changed after erasing losses of as much as 0.4 percent. The pound weakened 0.4 percent, extending a two-day decline.
- The yen climbed 0.3 percent to 114.74 per dollar.
- The South African rand fell 1 percent against to $13.6113 amid speculation President Jacob Zuma is planning a cabinet reshuffle.
- Oil dropped a second session amid speculation increases in U.S. drilling will boost output and diminish the effects of supply cuts made by OPEC and its allies. West Texas Intermediate crude slid 0.2 percent to $53.30 a barrel.
- Gold fell 0.1 percent to $1,190.62, extending its first weekly loss in a month.
- Rubber futures rallied 6.1 percent to 335.1 yen a kilogram, the highest since 2011 on concerns about tight supply of the commodity from Thailand
- European bonds slid after annual inflation data from German regions Saxony and Hesse beat economists’ forecasts. The yield on 10-year French bonds climbed four basis points to 1.1 percent.
Spain’s 10-year bond yield increased five basis points to 1.62 percent, while Italy’s jumped 10 basis points to 2.32 percent.
- U.S. Treasury 10-year yields were little changed.