Oil Drops Before Iran Decision as Dollar Advances: Markets Wrap

Oil headed to its biggest drop in a month as traders digested reports that President Donald Trump will pull out of the Iran nuclear deal. The dollar rallied and Treasury yields pushed higher.

U.S. stocks slumped as utility and telecom shares fell. West Texas crude sank as much as 4.4 percent before paring the loss as a U.S. official said Trump would quit the accord. The greenback strengthened for a third day. Ten-year Treasury yields approached 3 percent after JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned a climb to 4 percent may be coming.

Concern about an increase in geopolitical tension is weighing on global sentiment at the same time worries about pricey stocks and rising borrowing costs are migrating to the developing world, where higher Treasury yields and a stronger dollar could sap demand. Fresh sanctions on Iran could potentially disrupt supplies from OPEC’s third-largest producer.

“Our take is that no matter what gets announced, that will just be the beginning of negotiation,” Lori Heinel, the deputy global chief investment officer at State Street Global Advisors, said in an interview at Bloomberg’s New York headquarters. “And as long as there’s a certain amount of negotiation, the chances of an extreme outcome, an extreme collapse in supply for example, is off the table.”

Argentina’s peso pared losses after the government was said to be in talks with the International Monetary Fund for a $30 billion flexible credit line to help defend the currency after it dropped to a record. Italian shares tumbled on the prospect for fresh elections that may boost the chances of a populist government taking power. Indonesia’s rupiah sank to its weakest since 2015, and the nation’s government bonds slumped. Turkey’s lira hit another low and the country’s benchmark equity index fell.

Terminal users can read more in our markets live blog.

Some key events coming up this week:

President Trump is scheduled to disclose his Iran decision at 2 p.m. Tuesday in Washington. Malaysia holds a general election Wednesday. Japanese Prime Minister Shinzo Abe hosts South Korean President Moon Jae-in and Chinese Premier Li Keqiang on Wednesday. There’s a Bank of England policy decision on Thursday. U.S. inflation data for April is due the same day. Some of the company earnings due include Walt Disney, Petrobras, Marriott, Toyota, Ambev and Deutsche Telekom.And these are the main moves in markets:

Stocks

The S&P 500 Index slipped 0.3 percent as of 1:07 p.m. in New York The Stoxx Europe 600 Index rose 0.1 percent. The MSCI Asia Pacific Index added 0.4 percent to the highest in a week. Japan’s Nikkei 225 Stock Average rose 0.2 percent. The MSCI Emerging Market Index rose 0.2 percent.

Currencies

The Bloomberg Dollar Spot Index climbed 0.2 percent to the highest this year. The euro declined 0.4 percent to $1.1876, the weakest since December. The British pound fell 0.1 percent to $1.3547, the weakest in more than four months. The Japanese yen was little changed at 109.12 per dollar.

Bonds

The yield on 10-year Treasuries rose three basis points to 2.98 percent. Germany’s 10-year yield climbed three basis points to 0.56 percent. Britain’s 10-year yield increased four basis points to 1.44 percent.

Commodities

West Texas Intermediate crude decreased 3 percent to $68.62 a barrel, the first retreat in a week. Gold slipped 0.2 percent to $1,312.16 an ounce.