Global stocks ease over rate scare
Global equity markets eased on Wednesday on a few poor corporate results and the release of Bank of England minutes that hinted at an early interest rate hike, but minutes from the Federal Reserve showed no desire to bring forward plans to raise rates.
The Fed said it has been surprised by how quickly the United States (US) labour market is healing yet the recovery has to be more convincing to change its view on when to increase rates.
Stocks on Wall Street rebounded after the release of the Fed minutes, suggesting investors believe there will be no change in monetary policy, while US Treasuries prices fell.
“The Fed remains dovish. However, one eye is looking towards improvements in labor markets. Potentially a rate increase might come slightly sooner or the increases might come faster than expected,” said Putri Pascualy, credit strategist For Pacific Alternative Asset Management Company, In Irving, California.
Wall Street pushed higher, but MSCI’s all-country equity index was 0.04 percent lower. The Dow Jones industrial average rose 68.78 points, or 0.41 percent, to 16,988.37. The S&P 500 gained 5.71 points, or 0.29 percent, to 1,987.31 and the Nasdaq Composite added 3.167 points, or 0.07 percent, to 4,530.681.
Earlier in Europe, the FTSEurofirst 300 index of leading European shares closed down 0.07 percent at 1,346.02.
A warning from brewer Carlsberg that profits would fall this year due to deteriorating conditions in Russia rattled European investors.
A cut in its full-year sales forecast by Lowe’s Companies also unnerved investors, though the world’s No. 2 home improvement products retailer also posted better-than-expected second-quarter results.
Reuters reported that Sterling and UK bond yields rose after the surprise tilt toward higher British rates, while the U.S. dollar advanced to its highest against the euro since last September.
The Fed minutes come ahead of Fed Chair Janet Yellen’s widely anticipated address to the annual gathering of central bankers in Jackson Hole, Wyoming, on Friday.
With US and global stock indexes trading close to all-time highs, investors await a reaffirmation of the accommodative monetary policies that have helped spur a global rally.
“The next leg up is going to come from what we hear on Friday from Yellen,” said Phil Orlando, chief equity market strategist at Federated Investors in New York. “The market has been a little bit on tenterhooks,” he said.
The dollar broke through resistance at $1.3300 and last November’s high of $1.3295 per euro to trade as high as $1.3275. It also climbed to a 4-1/2-month high against the yen. It was last up 0.4 percent versus the euro at $1.3266.
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