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London - Global stocks took another leg down on Thursday in the wake of Federal Reserve minutes that painted a healthy picture of the world’s biggest economy, raising the prospect of tighter monetary policy. The dollar was steady, while Treasuries rose and European bonds were mixed.
The Stoxx Europe 600 Index slid as all the major national equity gauges in the region fell. Earlier in Asia most shares dropped, though China’s market bucked the trend as it reopened after a holiday.
Futures on the S&P 500 Index declined. The Treasury move pared some of Wednesday’s slide following the minutes from the Fed’s January meeting, which showed increasing confidence growth will pick up despite concerns around inflation.
“The market is pricing in the possibility of a tighter Fed over time,” Evan Brown, director at UBS Asset Management, who previously worked on the open market trading desk at the New York Fed, told Bloomberg TV in New York.
On a day-to-day basis “you’re going to see volatility, you’re going to see equities get a little skittish when yields are rising, but as you look over the long term, fundamentals on the economy are very strong.”
For now, markets remain fragile. February is shaping up as one of the worst months for global equities in more than a year as concerns about a pick-up in inflation and expensive stock prices outweigh evidence of a buoyant US economy. With recent data underpinning the view that inflation is no longer lagging, the OIS space shows traders pricing in just shy of three US rate hikes over the next 12 months.
Meanwhile the mood wasn’t all risk-off on Thursday. As well as the mixed picture for European bonds, gold retreated alongside most commodities. West Texas oil fell to around $61 a barrel.
Here are some key events scheduled for this week:
• The ECB debate on capping asset purchases is the focal point for those perusing its account of policy makers’ January meeting, due today.
• UK PM Theresa May is locking down her ministers in a bid to agree what kind of post-Brexit trade deal they want from the EU.
• Fed policy makers still due to speak include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic.
• Companies announcing earnings include Woolworths and Royal Bank of Scotland.
These are the main moves in markets:
Stocks
• The Stoxx Europe 600 Index decreased 0.9% as of 10:43, the largest dip in almost two weeks.
• Futures on the S&P 500 Index fell 0.2% to the lowest in more than a week.
• The MSCI Asia Pacific Index decreased 0.8% to the lowest in more than a week on the largest dip in almost two weeks.
• The UK’s FTSE 100 Index decreased 1% to the lowest in more than a week on the biggest dip in almost two weeks.
• The MSCI Emerging Market Index decreased 1.1%, the largest dip in almost two weeks.
Currencies
• The Bloomberg Dollar Spot Index fell less than 0.05%, the first retreat in a week.
• The euro gained 0.1% to $1.2292, the largest advance in a week.
• The British pound dipped 0.2% to $1.389, reaching the weakest in more than a week on its fifth consecutive decline.
• The Japanese yen gained 0.5% to 107.26 per dollar, the first advance in a week.
• The rand sank 0.4% to R11.71 per dollar.
• The MSCI Emerging Markets Currency Index sank 0.4% to the lowest in more than a week on the largest decrease in two weeks.
Bonds
• The yield on 10-year Treasuries dipped three basis points to 2.92%.
• Germany’s 10-year yield decreased two basis points to 0.71%, the lowest in more than two weeks.
• Britain’s 10-year yield fell one basis point to 1.555%, the lowest in more than two weeks.
Commodities
• West Texas Intermediate crude decreased 0.7% to $61.27 a barrel, the lowest in a week on the largest dip in almost two weeks.
• Gold fell 0.1% to $1 323.18 an ounce, reaching the weakest in more than a week on its fifth consecutive decline.
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