Oil drops after Iran to raise output to pre-sanction levels and the dollar gains versus peers before Fed meeting ends Wednesday.

(Bloomberg) — U.S. stocks fluctuated, while oil retreated as investors awaited for further assurance that central banks will continue to support growth and the glut in crude will ease.

Gains by consumer companies offset losses by financial and energy stocks in the Standard & Poor’s 500 Index, as West Texas Intermediate crudedeclined as much as 4.7 percent on Iranian plans to boost oil production. Emerging market equities rose, as shares in Egypt rallied after the country’s central bank devalued its currency. The dollar climbed against 13 of its 16 major peers. Thawing credit markets enabled UBS Group AG to hold the first sale of the riskiest type of bank debt in Europe for two months.

Economic data around the world suggest the global economy is far from the recession environment that wiped almost $9 trillion off the value of equities worldwide this year through mid-February, and central banks are indicating they’ll support asset prices when needed. The Bank of Japan, which adopted a negative interest rate in January, will conclude a policy review on Tuesday and a Federal Reserve meeting ends Wednesday.

“We’ve come so far so fast that at this stage, we’re just treading water after such a big move,” Frank Cappelleri, executive director at Instinet LLC, said by phone. “One area to watch for clues are financials and banks. That becomes even more important with the Fed announcement on Wednesday. They’ve been a major reason why the S&P 500 has been able to extend further than it originally would have.”

Stocks

The S&P 500 slipped 0.1 percent at 12:48 p.m. New York time after falling as much as 0.5 percent. The index jumped to its highest close this year on Friday as investors positively reassessed the European Central Bank stimulus measures.

“The combination of some modest profit taking and then a reaction to the price of oil declining is giving the market not even a hair cut, but just a slight trim,” John Stoltzfus, the New York-based chief market strategist at Oppenheimer & Co., said by phone. “Even though cheap oil is great for most countries and most sectors, we’re still regrettably positively correlated with price of oil.”

The Fed’s two-day meeting this week will be in focus as investors seek indications of the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 50 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.

Starwood Hotels & Resorts Worldwide Inc. jumped more than 7 percent. The company received an unsolicited takeover proposal from a group of investors led by China’s Anbang Insurance Group Co., potentially upending a deal with Marriott International Inc.

The Stoxx Europe 600 Index gained 0.7 percent. European stocks have rebounded 14 percent from last month’s low, with commodity producers and banks leading the gains. After a mixed initial response to the European Central Bank’s latest stimulus measures, the Stoxx 600 erased weekly losses on Friday to post its longest streak of weekly advances in a year.

Bonds

Benchmark Treasuries rose on Monday, with the 10-year yield falling four basis points to 1.95 percent. 

Morgan Stanley forecast the rate will fall to 1.45 percent by the end of September, approaching the record low of 1.38 percent set in 2012, and said the Fed will wait until December before raising interest rates. The U.S. bank also cut its end-2016 projection to 1.75 percent and lowered forecasts for yields on similar-maturity debt issued by Germany, Japan and the U.K., according to a report released on Sunday.

UBS Group was offering so-called additional Tier 1 notes, denominated in dollars. The market has been closed since mid- January amid a rout caused by investor concerns about bank earnings and the possibility that low capital levels would prompt regulators to prevent coupon payments on the bonds.

Emerging markets

Emerging-market stocks advanced for a third day, with the the MSCI Emerging Markets Index heading for the highest close since December, led by Egypt which is up the most since July 2013 after the central bank devalued the pound and announced it will adopt a more flexible exchange rate.

Egypt’s EGX 30 Index soared 6.7 percent, the most since July 2013 and entering a bull market.

Currencies

The dollar rose for the first time in four days as investors recalculated the likelihood of an interest-rate increase from the Fed, having wiped out expectations for any tightening earlier this year. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, advanced 0.3 percent.

Russia’s ruble weakened 1.3 percent with oil as Iran announced plans to expand production countered a dwindling rig count in the U.S. Turkey’s lira fell 0.2 percent as the government pledged to retaliate to a suicide car bomb that killed at least 37 people in the capital on Sunday.

The rand slid 2 percent. South Africa’s Directorate for Priority Crime Investigation wants information from Finance Minister Pravin Gordhan on what he knew about a so-called rogue unit in the tax agency that investigated political leaders, the Sunday Independent newspaper reported, citing a letter sent by the police unit’s head to the minister’s lawyers.

The Egyptian central bank devalued its pound by almost 13 percent at an “exceptional” sale of dollars on Monday. The central bank said it sold $198.1 million to local lenders at 8.85 pounds per dollar. That compares with a previous exchange rate of 7.73 pounds.

Commodities

The Bloomberg Commodity Index dropped 0.9 percent, led lower by oil after Iranian plans to increase output.

Iran plans to boost output to 4 million barrels a day before it will consider joining other suppliers in seeking ways to rebalance the global crude market, Oil Minister Bijan Zanganeh said, according to the Iranian Students News Agency.

Copper fell 0.6 percent to $4,938 a ton on the London Metal exchange and gold in the spot market fell a second day.

– With assistance from Lianting Tu, Toshiro Hasegawa, Chikako Mogi, Wes Goodman, Emma O’Brien, Adam Haigh, Neil Denslow, Douglas Lytle, James Regan, Alan Soughley and Eddie van der Walt.

See also:

Stop bashing Wall Street. Times have changed

How to use the power of negative rates

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.