21:50 GMT: Gold retreated from a fresh peak and stock markets struggled to make headway on Thursday as a stronger dollar damped investors’ ebullience.
The greenback’s bounce off 15-month lows challenged traders’ fashionable mantra of “weak dollar good” for riskier assets such as equities and commodities.
Against the euro the buck was up 1.0 per cent at $1.4842, and it also rallied versus the yen to reclaim the Y90 mark. On a trade-weighted basis the greenback rose 0.7 per cent to 75.68.
Early Asian action had seen renewed weakness in the greenback and this was sufficient to propel gold to a new all-time high of $1,123.38 an ounce. But the dollar’s new-found vigour saw the precious metal later drop 1.3 per cent to $1,103.4.
Oil also fell as the dollar rallied, down 3 per cent at at $76.69 a barrel. Inventories data, postponed because of Wednesday’s Veterans’ Day holiday, showed stockpiles higher than expected and this added to the downward pressure.
The S&P 500 closed down 1.2 per cent at 1,087.24, as strong third quarter earnings from Walmart and a report that showed initial jobless claims came in lower than expected and were unable to offset the pressure stocks felt as the dollar rallied.
Asian-Pacific markets were set to follow Wall Street’s slide. December futures for the Nikkei 225 were down 20 points at 9770 and in Sydney, futures on the ASX 200 fell 0.7 per cent.
The US Treasury sold a record $16bn 30-year bonds at a rate of 4.469 per cent on Thursday, completing this week’s $81bn in Treasury coupon debt sales.
Demand from non-dealers was strong as dealers were only awarded 43.9 per cent of the sale. However, the sale arrived 3.5 basis points above the auction deadline level. The sloppy result, sparked a rise in Treasury yields, led by the current 30-year bond, which jumped to 4.48 per cent from 4.442 per cent in post auction trade. Buyers then emerged and late in New York the bond was yielding 4.41 per cent.
The 10-year Treasury yield fell 2 bp to 3.438 per cent.
”A weaker than hoped-for auction after the back-up in rates and steepening of the curve,” said Bill O’Donnell, head of rate strategy at RBS Securities. ”All told, a disappointment after two solid auctions earlier this week.”
The Vix volatility index, a widely-watched measure of risk aversion, climbed 5.5 per cent to trade above 24.
The Market Eye
Gold is up nine years in a row. It stands at fresh nominal highs. How will we know when the bullion bull market is about to end? One clue to an asset nearing its peak is its move from the financial to the mainstream media. In the UK, television advertising for personal debt management and injury lawyers have been replaced by a plethora of companies encouraging consumers to monetise their ‘unwanted’ gold by posting it to them for appraisal. Now we have über commodity bug and investment manager Marc Faber saying that gold ‘will not see less than the $1,000 level again’. The chart for gold is yet to turn parabolic, but fingers should be hovering over the sell button for the first sighting of a claim that bullion is facing ‘a new paradigm’.
The main European exchanges wobbled on the dollar’s advance but stabilised to sit within sight of 2009 highs. The FTSE 100 closed up 0.2 per cent at 5,276.5, while the FTSE Eurofirst 300 added 0.1 per cent at 1,014.9. News that eurozone industrial production had risen 0.3 per cent in September, slightly less than expected, had negligible impact.
Asian stock markets had provided little impetus. Bourses in the region put in a varied showing with not much thrust offered in turn by Wall Street after the S&P 500 retreated from a new high for 2009 of 1,105.3 to settle up 0.5 per cent at 1,098.5 on Wednesday.
The Nikkei closed down 0.7 per cent at 9,804.5 despite car manufacturers gaining following a positive broker’s note. The yen, at the time still stuck below Y90 to the dollar, provided a drag.
Japan’s 10-year bond yield dipped 0.6 basis points to 1.380 per cent.
Mainland China’s benchmark, the Shanghai Composite, lost 0.1 per cent per cent at 3,172.95, Hong Kong’s Hang Seng was down 1.1 per cent at 22,397.6 as HSBC bank saw profit taking.
In Australia, the S&P/ASX 200 gave ground, down 0.2 per cent to 4,747.9 after labour data raised fears of more interest rate increases.
The Aussie dollar hit a 15-month high against its US namesake of $0.9369 on strong jobs figures. It later relinquished those gains to trade down 0.7 per cent at $0.9234 as so-called commodity currencies wilted in the face of the dollar’s advance.
