Stocks, the dollar and bond yields all drifted lower on Monday as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets at the expense of bonds.
Wall Street hit record highs and the dollar rose to a 14-year peak last week, tempting investors to cash in and book some pre-holiday profit as the last full trading week of the year got underway.
The Japanese yen bounced back strongly from last week’s mauling, helped by strong Japanese export data, as the Bank of Japan began a two-day policy meeting at which it is widely expected to keep rates on hold.
Bank stocks were among the biggest fallers in Europe following two weeks of strong gains on the back of rising bond yields. Their decline pushed the broader indices into the red, while Asian stocks slipped to a four-week low.
Europe’s index of leading 300 shares retreated from Friday’s 11-month high and was down 0.1 percent, while banks were down 0.9 percent. Shares in Italy’s Monte dei Paschi fell 9 percent as it made a last-ditch attempt to raise 5 billion euros by year-end and avoid a state bailout.
Germany’s DAX and France’s CAC were down 0.1 and 0.2 percent, respectively, while Britain’s FTSE 100 was up 0.1 percent. and U.S. stock futures pointed to a slightly higher open on Wall Street.
“The Trump rally has stalled a little in recent sessions but so far, I’m seeing few signs that we’re going to see the year out on a negative note,” said Craig Erlam, senior market analyst at OANDA.
“Of course, in very quiet periods such as this, these things can often be increasingly difficult to predict,” he said.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell for the third straight day, shedding 0.3 percent to a four-week low. It has lost 3.7 percent since Trump was elected.
In addition, investors turned cautious after China’s top leaders said over the weekend they would stem asset bubbles in 2017 and place greater importance on the prevention of financial risk.