Dollar Gains; German Bonds Selloff Continues

 
Snapshot: 

        -Dollar nudges higher; 10-year Treasury yield at 2.136%; stock futures near flat; Nymex crude at $59.33; gold at $1187.00
        -Watch for: Trade deficit, non-manufacturing PMI; speech by Fed's Kocherlakota; earnings from Sprint, Walt Disney, News Corp., Kellogg
        News: EU Lifts Eurozone Growth Forecast; Eurozone Producer Prices Picking Up; Australia Cuts Rate to Record Low
        In currency markets Tuesday, the euro continued to edge lower against the dollar, having hit a two-month high against the buck on Friday. Recently it was trading just under $1.109.
        The British pound was steady against the dollar with just two days to go until one of the most uncertain general elections in recent history.
        U.S. Treasurys were a touch higher in European trade, steadying after the selloff seen in the last few days.
        The 10-year yield was 0.01 percentage point lower at 2.136%, close to the two-month high hit on Monday. The gains come despite further weakness in German bonds, which have generally led moves in fixed income market over the last week.
        "Our rates strategists are inclined to think the April rise in yields is more a healthy correction than the start of a major trend," said strategists at Barclays.
        German government bonds remained pinned at levels last seen more than two months ago, signaling that the recent selloff may be more than just a passing blip.
        The yield on the 10-year Bund edged higher early in the session and was recently 0.45%. Less than two weeks ago the 10-year Bund yield hit an all-time low of 0.05%, spurring predictions of zero or even negative yields on the benchmark for European credit markets.
        "The bond market meltdown goes on," Societe Generale strategist Kit Juckes wrote in a note Tuesday. He agreed with others, however, that while the selloff has now moved into its second week, it still looks "far more like a correction than a major trend change."
        Citi strategists said that they, too, see this as "the correct response to global policy easing" but we "do not see a turning point."
        U.S. stocks were heading for losses for the first time in three sessions, with futures pointing lower ahead of trade numbers and service-sector data.
        Futures for the Dow Jones Industrial Average fell 12 points, or 0.1%, to 17,983, while those for the S&P 500 index dropped 2.55 points, or 0.1%, to 2,106.75. Futures for the Nasdaq 100 index lost 8 points, or 0.2%, to 4,468.50.
        Investors are already looking ahead to the top-tier nonfarm-payrolls report on Friday, but have some data to zoom in on Tuesday. At 8.30am ET, the trade deficit for March is due, forecast to show a rise to $43.5 billion, from $35.4 billion in February.
        At 10am ET, the ISM nonmanufacturing data are due. The report - also known as the ISM reading for the services sector - is expected to come in at 56.5% in April, unchanged from March.
        Among Federal Reserve speakers, Minneapolis Fed President Narayana Kocherlakota speaks at the town hall in Marshall, Minnesota at 8pm ET.
        In commodities, oil prices rose ahead of the latest U.S. oil inventory data, but some analysts cautioned the recent rally might prove unsustainable.
        Brent crude, the global oil benchmark, rose 0.5% to $66.75 a barrel on London's ICE Futures exchange after falling in earlier trade. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June recently traded up 0.7% at $59.33 a barrel.
        Gold inched 0.1% higher to just under $1,187 per troy ounce.
        EU Lifts Eurozone Growth Forecast
        European Union economists said cheaper oil and central bank stimulus should help deliver faster growth in the region this year, but questioned whether Europe's economy would continue to expand at these rates over the longer term.
        Eurozone Producer Prices Picking Up
        Prices at eurozone factory gates increased for the second consecutive month in March, albeit by slightly less than forecast, a sign that consumers may soon have to pay more for the goods and services they buy.
        Australia Cuts Rate to Record Low
        Australia's central bank cut interest rates for the second time this year, moving to shore up economic growth in the face falling commodity prices and a slowdown in China.
        Spanish Jobless Numbers Fall
        Spain's government said the number of people seeking jobless benefits fell last month as the country's economic recovery strengthened.
        IMF Warns on Mideast Growth
        The economies of the Middle East and North Africa continue to expand despite the fall in oil prices but growth remains too tepid to help tackle the region's biggest challenge of unemployment, according to the IMF.
        Write to paul.larkins@wsj.com
        (END) Dow Jones Newswires

        May 05, 2015 06:22 ET (10:22 GMT)

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