Global Stocks Lower as U.S. Dollar Weakens--Update
July 18 2017 - 4:02AM
Dow Jones News
By Riva Gold, Kevin Kingsbury and Kenan Machado
-- Stocks in Europe and Asia under pressure
-- Dollar falls to postelection low as investors eye Washington
-- Netflix, Goldman Sachs, Bank of America earnings in focus
Global stocks were under pressure Tuesday while the dollar fell
to postelection lows after Senate Republicans gave up their efforts
to dismantle and replace much of the Affordable Care Act.
The Stoxx Europe 600 was down 0.5% in morning trading, following
modest declines across Asian markets. Futures pointed to a 0.1%
opening loss for the S&P 500 ahead of a flurry of earnings
reports.
A steep fall in the dollar sent Asian and European currencies
higher, pressuring shares of exporters in those regions on Tuesday.
The Wall Street Journal Dollar Index, which hit its lowest level
since October on Friday, was recently down 0.4%, while the euro
topped $1.15 for the first time since May 2016 and was last up 0.4%
at $1.1528. The British pound rose 0.4% to $1.3108, sending the
FTSE 100 down 0.6%.
Downward pressure on the dollar comes after the U.S. currency
surged following President Donald Trump's election win. Some stocks
also gained on expectations the new administration would cut taxes,
deregulate and invest in infrastructure. Such investor enthusiasm
has waned this year, even as stocks have continued to power
ahead.
Investors said the recent struggle to pass a health-care bill
added to doubts about the likely implementation of the other
policies backed by the Trump administration.
If Republicans can't pass a replacement health-care bill, "there
is little else [they] could do" with passing other legislation,
said Toshihiko Sakai, senior manager of forex and
financial-products trading at Mitsubishi UFJ Trust and Banking.
Fiscal policy is now going to be in the spotlight, said Luke
Tilley, chief economist at Wilmington Trust. "Once the health care
debate and legislation is done, I expect a sudden shift in focus to
prospective tax reform, which will have a larger impact on sector
performance and dispersion," said Mr. Tilley.
Investors were also focused on corporate earnings Tuesday with
Goldman Sachs Group Inc. and Bank of America Corp. set to report
results ahead of the opening bell.
Shares of Netflix Inc. were up 10% in aftermarket trading Monday
after the company blew through its subscriber-growth estimate in
the second quarter.
In Europe, shares in Swedish telecoms-equipment maker Ericsson
were down 10% in early trading after the company warned that
earnings could weaken further after swinging to a net loss in the
second quarter. Shares of Anglo-Australian mining house Rio Tinto
fell 2% after it scaled back its export guidance for iron-ore
production. Iron ore was the biggest driver of Rio Tinto's earnings
last year.
Earlier, consumer cyclicals, or companies whose output of
consumer goods tend to be tied to economic growth, led losses in
Asia-Pacific trading Tuesday, as weakness in the dollar weighed
down on market sentiment in Australia and Japan.
The Australian dollar jumped 1.5% to its highest level against
the greenback in two years, getting an additional boost from the
release of minutes from this month's central-bank meeting. During
the gathering, Australian officials discussed the effects of a
neutral interest-rate policy. Australia's S&P/ASX 200 fell 1.2%
amid declines in big banks, as well as health-care shares.
Weakness in the dollar--both Tuesday and from Friday after weak
U.S. economic data--filtered through Japanese stocks after Monday's
holiday. The Nikkei was down 0.6% Tuesday, while the dollar was
last down 0.4% against the yen at Yen112.1620.
Chinese stocks recovered slightly after Monday's slump. The
Shenzhen Composite was up 0.5%, while the Shanghai Composite added
0.4%.
Elsewhere in markets, gold edged up 0.2% to $1,235 an ounce.
Yields on 10-year Treasurys fell to 2.304% from 2.309% on Monday.
Yields move inversely to prices.
Kosaku Narioka and Robb M. Stewart contributed to this
article.
Write to Riva Gold at riva.gold@wsj.com, Kevin Kingsbury at
kevin.kingsbury@wsj.com and Kenan Machado at
kenan.machado@wsj.com
(END) Dow Jones Newswires
July 18, 2017 04:47 ET (08:47 GMT)
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