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Stocks tread water as gold, oil declines spook sentiment

Stock Markets Aug 09, 2021 04:21PM ET
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2/2 © Reuters. FILE PHOTO: People are reflected on an electric board showing Nikkei index and its graph outside a brokerage at a business district in Tokyo, Japan, June 21, 2021. REUTERS/Kim Kyung-Hoon 2/2
 
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By Matt Scuffham

NEW YORK (Reuters) - Global share prices treaded water on Monday as sharp falls in gold and oil prices and concerns over the spread of the Delta coronavirus variant dented sentiment.

U.S. stock indexes were mixed at the close.

The Dow Jones Industrial Average fell 106.66 points, or 0.3%, to 35,101.85, the S&P 500 lost 4.17 points, or 0.09%, to 4,432.35 and the Nasdaq Composite added 24.42 points, or 0.16%, to 14,860.18.

"With the Delta variant spreading, money managers who were over-invested in the re-opening trade continue to unwind that trade because it's not working right now," said Dennis Dick, a trader at Bright Trading LLC.

In Europe, gains in healthcare, utilities and technology stocks outweighed declines triggered by a fall in commodity prices earlier on Monday.

The pan-European STOXX 600 index rose 0.2% to a closing high of 470.68.

MSCI's gauge of stocks across the globe shed 0.03%.

Oil prices fell as much as 4%, extending last week's steep losses on a rising U.S. dollar and concerns that new coronavirus-related restrictions in Asia, especially China, could slow a global recovery in fuel demand.

U.S. crude oil futures settled at $66.48 per barrel, down $1.80 or 2.6%. Brent crude ended at $69.04, down $1.66 or 2.4%.

"The sell-off in commodities is driving growth concerns as some investors are turning cautious," said Ed Moya, senior market analyst at OANDA.

Gold slumped to a more than four-month low as strong U.S. jobs data bolstered expectations for an early tapering of the Federal Reserve's economic support measures.

Spot gold dropped 1.9% to $1,729.09 an ounce. U.S. gold futures settled 2.1% down at $1,726.50.

Bitcoin hit a three-month high and broke through the $46,000 barrier as gold fell.

"Money managers are seeing that as an alternative to gold," said Dick.

Bitcoin last rose 5.46% to $46,253.56.

The strong jobs data also caused U.S. Treasury yields to rise.

Benchmark 10-year notes last fell 11/32 in price to yield 1.3254%, from 1.288% late on Friday.

Holidays in Tokyo and Singapore made for thin trading conditions, adding to the volatility. After an initial fall, MSCI's broadest index of Asia-Pacific shares outside Japan recovered to be up 0.1%.

Chinese trade data over the weekend undershot forecasts, while figures out on Monday showed inflation slowed to 1% in July, offering no barrier to more policy stimulus.

The U.S. Senate came closer to passing a $1 trillion infrastructure package, though it still has to go through the House.

Investors were still assessing whether Friday's strong U.S. payrolls report would take the Federal Reserve a step nearer to winding back its stimulus.

"What we're seeing is a little bit of early profit-taking on the back of fear that tapering will come in earlier in September," said Sebastien Galy, senior macro strategist at Nordea Asset Management. "But as you can see, it has little impact because the effect of a better economy far outweighs the substitution effect of higher interest rates."

LONGER TAPER

However, the pace of tapering was still up in the air and would decide when an actual rate increase comes, he said. The Fed is buying $120 billion of assets a month, so a $20 billion taper would end the program in six months, while a $10 billion tapering approach would take a year.

The spread of the Delta variant could argue for a longer taper, with U.S. cases back to levels seen in last winter's surge with more than 66,000 people hospitalized.

Data for July CPI due this week is expected to confirm inflation has peaked, with prices for second-hand vehicles finally easing after huge gains.

Four Fed officials are speaking this week and will no doubt offer enough grist for markets looking for clues on the timing of tapering.

In the meantime, stocks have been mostly underpinned by a robust U.S. earnings season. BofA analysts noted S&P 500 companies were tracking a 15% beat on second-quarter earnings with 90% having reported.

"However, companies with earnings beats have seen muted reactions on their stock price the day following earnings releases, and misses have been penalized," they wrote in a note.

"Guidance is stronger than average but consensus estimates for two-year growth suggest a slowdown amid macro concerns."

The dollar index rose 0.115%, with the euro down 0.2% to $1.1737.

Stocks tread water as gold, oil declines spook sentiment
 

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Comments (10)
Madan Kovur
Madan Kovur Aug 09, 2021 8:13PM ET
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The reason for sharp pullbacks in gold is to liquadate leveraged bullish positions opened by retailTraders ahead of employment data. Many got margin calls and getting their gold positions liquidated. Once weakhands are out. It will pop again. BTC went through similar rounds of liqudating leveraged money in the recent months.
Madan Kovur
Madan Kovur Aug 09, 2021 8:13PM ET
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Liquidated. Once weak hands are out it will pop again. Similar to what we saw in BTC leveraged liquidation ealier this year.
Lawrenti Berija
Lawrenti Berija Aug 09, 2021 3:56PM ET
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since when affects a declining gold price the stock market. read a lot of humbug here but this headline takes the 1. price
Jon Bal
Jon Bal Aug 09, 2021 9:11AM ET
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the roaring 2020's..where trillion is the new billion
Dronio Stoica
Dronio Stoica Aug 09, 2021 9:11AM ET
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This is primarily true...it takes 7 million to equal 1 million in 1970's dollars.
Klaus Weyers
Klaus Weyers Aug 09, 2021 9:11AM ET
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and we know what happened in 1929
Necleus Electron
Necleus Electron Aug 08, 2021 11:06PM ET
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US has been printing dollars like nobody business, ever since it overtook to became the reserve currency. Value of the dollars are artificially pumped.
Alif Fajar
Alif Fajar Aug 08, 2021 11:06PM ET
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it is not artificialy pumpedvalue if dollar come only from the trust in dollar that mean US control over the world trend and its economy inflation within the with 78 billion trade deficit per month most US dollsr sit in the vault of foreign central bank
Alif Fajar
Alif Fajar Aug 08, 2021 11:06PM ET
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well replying from the phone sorry for the gramar
Mario tragik
Mario tragik Aug 08, 2021 10:22PM ET
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This did not age well, all asia in the green now.
Iwan kadarusman
Iwan kadarusman Aug 08, 2021 9:57PM ET
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gold will rebound soon
William Smith
William Smith Aug 08, 2021 9:53PM ET
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The Fed will never taper. The economy collapses at this point if the printing stops. Bernanke's actions created endless money printing. The printing continues until the entire mess collapses. The economy collapses sooner if they taper, so the Fed wont taper.
Ji Go
Ji Go Aug 08, 2021 9:53PM ET
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“....the printing stops. [Greenspan’s] actions created endless money printing.”Fixed that for you
Miles Mathewson
Miles Mathewson Aug 08, 2021 8:37PM ET
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When China begins to look after their workforce dignity, something the US has always quickly point their fingers at, the west gets all wary? Ah easy to say when it doesn't impact your pockets hein!! only a blind mouse couldn't see this is only politics at play.
Jim Jones
Jim Jones Aug 08, 2021 8:25PM ET
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Biden and Yellen can buy all the gold in the world with more debt. No need to worry.
Stan Smith
Stan Smith Aug 08, 2021 8:23PM ET
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...mass sell off by the Bullion Banks on no news. Why...? Something stinks
Lawrenti Berija
Lawrenti Berija Aug 08, 2021 8:23PM ET
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everything stinks
 
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