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Dubai - US stock futures dropped while the dollar advanced as traders digested the more hawkish tone from the Federal Reserve. The British pound swung to a gain after a split among policy makers over the path of interest rates unexpectedly deepened.
US equities look set to join a broad-based selloff, with every sector of the Stoxx Europe 600 Index retreating and Bloomberg’s commodity index also falling to the lowest in more than a year.
The greenback advanced after the Fed raised interest rates for the second time in 2017 and chair Janet Yellen suggested the strength of the US labour market will ultimately prevail over recent weakness in inflation.
Yellen played down a softening of price pressures in the last few months and voiced confidence the central bank was on course to hit its 2% inflation goal. The Fed’s actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year.
Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5trn balance sheet this year.
Meanwhile, the special counsel investigating Russia’s interference in the 2016 election plans to interview two top US intelligence officials about whether President Donald Trump sought their help to get the FBI to back off a related probe of former National Security Adviser Michael Flynn, according to three people familiar with the inquiry.
Here are the key events investors will be watching this week:
The Bank of Japan concludes a two-day meeting on Friday. While economists don’t expect any significant changes to monetary policy, they will parse the BOJ’s statement and Governor Haruhiko Kuroda’s comments for clues to the outlook for inflation.
Here are the major movers:
Stocks
S&P 500 futures dropped 0.7% as of 13:48. The gauge fell 0.1% on Wednesday, while the tech-heavy Nasdaq indices retreated 0.4%. The Dow Jones Industrial Average edged higher to a fresh record. The Stoxx Europe 600 Index retreated 0.8%.
Currencies
The Bloomberg Dollar Spot Index rose 0.4% following three days of losses. The yen was 0.5% weaker at 110.08 per dollar after climbing 0.5% on Wednesday. The British pound strengthened 0.1% to $1.2761 and the euro retreated 0.5% to $1.1162.
Bonds
The yield on 10-year Treasury notes rose two basis points to 2.15%, after dropping 8.5 basis points on Wednesday to 2.13%, the lowest level since November. European bonds tracked the move in Treasuries on Wednesday, with the yield on benchmark UK bonds rising eight basis points to 1% and those of French and German peers increasing six and five basis points, respectively.
Commodities
West Texas crude futures swung between losses and gains before trading 0.5% lower at $44.49 a barrel, following a 3.7% drop in the previous session. US gasoline supplies unexpectedly rose for a second week. Gold slipped 0.3% to $1 256.76 an ounce after sliding 0.5% the previous day.
Asia
The Australian dollar rose after employment surged in May. The New Zealand dollar fell as data showed the economy grew less than expected in the first quarter.
Australia’s S&P/ASX 200 Index slumped 1.2%, with energy and raw-material shares dropping more than 2%. The Hang Seng Index slid 1.2% as Hong Kong followed the Fed’s move, elevating the risk of a selloff in the world’s priciest housing market.
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