US Selloff Spooks Thinly Traded Global Markets Sending Stocks, Yields, Dollar Lower

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One day after the biggest drop in US stocks in over two months, taking the Dow ever further from the “promised” Dow 20000, global stocks struggled as they tried to close out 2016 on a positive note. The dollar dropped the most in two weeks, sliding alongside bond yields, while oil retreated from its highest close in 17 months as investors prepared to close out a volatile year for financial markets. European stocks slid from a 2016 peak, and extended losses for 2016 after briefly going green for the year.
“Yesterday’s U. S. pending home sales number disappointed. Falling U. S. yields pushed the dollar generally lower,” said Marshall Gittler, head of investment research at FXPrimus.
The yield on 10-year U. S. Treasury notes slipped to a two-week low, pulling the dollar to a two-week low against the yen. “The dollar fall was mostly due to renewed doubts about the U. S. recovery after pending home sales dropped in November. This is where the risk-off reversal started,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group. “This pushed the exhausted U. S. bulls to the sidelines and triggered a sell-off in both the dollar and U. S. stocks. We’re seeing a bit of follow through in Europe today,” she said.
As a result of the dollar drop, which saw the Bloomberg dollar spot index slide for the first time in 4 days, the Japanese Yen strengthened to as much as 116.25, the lowest print in the pair since Dec. 14, sending Japan’s Topix to its biggest drop in more than a month, sliding 1.2%. The benchmark is heading toward a loss of 1.9% for the year, its first annual decline in five years. The Nikkei 225 Stock Average pared its gain for 2016 to 0.6%. ‘Flow-driven move pushed USD/JPY lower after U. S. markets underwent a rebalancing on recent stock rally and bond sell- off before the year-end,’ says Wako Ogawa, director of foreign-exchange sales at Deutsche Securities in Tokyo
Crude futures slipped for the first time in nine days, threatening to halt the longest winning streak since 2010. Gold extended gains. Oil was mixed after data showed a surprise build in U. S. crude inventories. U. S. crude fell 0.2 percent to $53.95 a barrel, while Brent was last up 0.2 percent at $56.32.

This post was published at Zero Hedge on Dec 29, 2016.