Jitters push Treasury yields, dollar to seven-month lows | Reuters

By Hilary Russ
| NEW YORK

NEW YORK U.S. Treasury yields and the dollar dropped to seven-month lows on Tuesday and world stocks slid as political uncertainty from the United States to Britain and the Middle East pushed investors away from risky assets. The yen and gold also gained amid prevailing caution as an Arab rift opened up around Qatar, and ahead of testimony from the former head of the FBI, a British election and the European Central Bank's next move, which all happen on Thursday."We have risk events piling up," said Blake Gwinn, U.S. rates strategist at NatWest Markets in Stamford, Connecticut. "We'll be very focused on what happens on Thursday, but it might end up being a dud."Wall Street was lower for a second day after both European and Asian stocks dropped during their sessions. Retail stocks also pulled shares lower, with Macy's Inc (M.N) losing ground after a warning on profit margins, and Wal-Mart Stores Inc (WMT.N) down after rival Amazon.com Inc (AMZN.O) said it would offer a discount on its popular Prime subscription service to shoppers who receive U.S. government aid.The Dow Jones Industrial Average .DJI fell 8.22 points, or 0.04 percent, to 21,175.82, the S&P 500 .SPX lost 0.61 points, or 0.03 percent, to 2,435.49 and the Nasdaq Composite .IXIC added 6.28 points, or 0.1 percent, to 6,301.96.On what BayernLB analysts called "Super Thursday", British voters will also go to polls in an increasingly unpredictable general election, the European Central Bank is due to meet and former FBI director James Comey will testify before Congress."Once these events pass, we may have a little more clarity and therefore see a little less caution in the markets," said Craig Erlam, a market analyst for OANDA securities.

The diplomatic spat in the Middle East initially dented oil prices, which slid below $47 a barrel on Tuesday before recovering on technical support.U.S. crude oil futures CLc1 settled up 79 cents, or 1.67 percent, at $48.19 per barrel. Brent LCOc1 was last up 1.17 percent on the day, or 58 cents, at $50.05.The pan-European FTSEurofirst 300 index .FTEU3 lost 0.62 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.14 percent.Investors piled into gold, U.S. Treasuries and German government bonds - some of the safest assets in the world - thrusting German 10-year borrowing costs DE10YT=TWEB to six-week lows.

U.S. Treasury yields dropped to a seven-month low of 2.129 percent at one stage US10YT=RR and gold XAU= briefly touched a high of $1,295.97, prices not seen since November. Lower bond yields come despite the Federal Reserve widely expected to raise U.S. interest rates a quarter point next week, but also follows a run of weaker-than-expected U.S. data. ECONALLUSSterling GBP= was 0.12 percent lower ahead of Thursday's general election. British Prime Minister Theresa May looks on course to increase her parliamentary majority, an opinion poll showed on Tuesday, shortly after another survey suggested the race with the opposition Labour Party was neck and neck. The dollar, meanwhile, was fell to a more than six-week low against the yen JPY= and was at its weakest since the November U.S. election against a basket of other world currencies .DXY.

The dip came ahead of Comey's expected testimony on Thursday.Reports suggest the former FBI chief plans to talk about conversations in which U.S. President Trump allegedly pressured him to drop his investigation into former national security adviser Mike Flynn, who was fired for failing to disclose conversations with Russian officials. (To view a graphic on 'World FX rates in 2017' click tmsnrt.rs/2egbfVh)(To view a graphic on 'Global bonds dashboard' click tmsnrt.rs/2fPTds0)(To view a graphic on 'Global market cap' click reut.rs/2mcp7T1)(To view a graphic on 'Emerging markets in 2017' click tmsnrt.rs/2ihRugV) (Additional reporting by Abhinav Ramnarayan in London, Richa Naidu in Chicago, Anya George Tharakan in Bengaluru and Richard Leong, Saqib Iqbal Ahmed and Jessica Resnick-Ault in New York)

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Published Date: Jun 07, 2017 01:00 am | Updated Date: Jun 07, 2017 01:00 am


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