The euro, yen and pound advanced; dollar slips 

The rally in the dollar petered out as investors awaited President Donald Trump’s decision on the leadership of the Federal Reserve and gauged prospects for U.S. tax cuts. Bonds edged higher and Asian stocks were mixed after American indexes closed at record highs.

The Bloomberg dollar index and 10-year Treasury yields both retreated from recent highs as news emerged that Trump has been presented with a shortlist of Fed-chair candidates with a range of views on policy. Among them, ex-board member Kevin Warsh has criticized the central bank for trying to do too much with monetary policy. Current Governor Jerome Powell has voted in sync with Chair Janet Yellen, who’s term is up in February.

Also in the mix: remarks by a key Republican senator raising concerns about the fiscal-deficit implications of the Trump administration’s tax plans. With China’s markets on a week-long holiday, there was little on the docket in Asia likely to offer fresh global trading themes. India’s central bank is forecast to keep interest rates unchanged Wednesday.

“Markets rightly or wrongly came to the view late last week that Warsh was the front-runner, and viewed him — rightly or wrongly — as having more hawkish proclivities than Janet Yellen,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. in Sydney. With news of Powell’s chances potentially rising and of headwinds to tax reform, “that’s seen the dollar giving back a little of the gains.”

Hong Kong equities added to yesterday’s surge on optimism about monetary loosening in China, Japan’s shares rose and Australia’s dropped. Crude oil fell to $50 a barrel, a two-week low, as the traders awaited U.S. inventory data. Markets in South Korea and Taiwan are closed for a holiday. A number of Fed speakers are on the schedule later this week, and Friday brings the monthly employment report, though that might be a cloudier gauge than usual due to the impact of hurricanes.

Among the key events coming this week:

• India’s central bank on Wednesday will probably hold its benchmark rate at a seven-year low and maintain its neutral stance, given inflation is picking up. Still, the central bank is expected to paint a subdued picture of India’s economy and could downgrade its forecasts for growth. Government and industry are pushing for easing.
• ADP employment data for September is due Wednesday, with the median estimate in a Bloomberg survey calling for a 135,000 increase in private payrolls, compared with 237,000 in August. Also this week are data on trade, durable goods and Friday’s September nonfarm payrolls report.
• China is due to report monthly foreign-exchange reserves Thursday.
• Minutes of the last ECB meeting are the European economic highlight this week.

Here are the main moves in markets:

Stocks

• Futures on the S&P 500 Index were little changed as of 1:30 p.m. in Tokyo. The underlying gauge rose 0.2 percent Tuesday, extending this year’s gain to 13 percent.
• Carmakers jumped after data indicated the U.S. auto market probably expanded for the first time this year.
• The MSCI Emerging Market Index rose 0.3 percent after jumping 1.3 percent on Tuesday.
• Japan’s Topix index was up 0.1 to 1,686.08. Australia’s S&P/ASX 200 Index declined 0.7 percent.
• Hong Kong’s Hang Seng index added 0.8 percent.

Currencies

• The Bloomberg Dollar Spot Index fell 0.4 percent, though is still up for the week so far.
• The yen advanced 0.2 percent to 112.61 per dollar.
• The euro rose 0.2 percent to $1.1764. With Spanish Prime Minister Mariano Rajoy fighting to maintain control after 2.3 million Catalans voted in Sunday’s makeshift referendum, Catalan
• President Carles Puigdemont said he will declare independence within days.
• The pound was up 0.2 percent at $1.3265.

Bonds

• The yield on 10-year Treasuries was 2.32 percent after reaching as high as 2.37 percent on Monday.
• A JPMorgan Chase & Co. survey found clients are the most short in the world’s largest bond market in more than a decade.
• Yields on Australian 10-year bonds slid almost 3 basis points to 2.82 percent.

Commodities

• Gold rose 0.3 percent to $1,275.53 an ounce.
• West Texas Intermediate crude dropped 0.7 percent to $50.05 a barrel.

Source: Bloomberg – Dollar Slips, Stocks Mixed as Fed Chief Pick Looms: Markets Wrap

---