Shares in Europe fell as disappointing Chinese data added to a perceived hawkish tilt in U.S. Federal Reserve policy that weighed on equities in Asia. Benchmark Treasury yields held near a four-year high and the dollar was steady after Tuesday’s jump.
Miners led a decline in the Stoxx Europe 600 gauge after lower-than-expected Chinese manufacturing data. The MSCI Asia Pacific Index dropped along with most national benchmarks in the region as Fed Chairman Jerome Powell’s upbeat assessment of the world’s biggest economy continued to reverberate through global markets. S&P 500 index futures edged higher, however, signaling a respite when U.S. markets open. The euro pared a decline, while German bunds held steady as inflation in the region slowed in line with estimates.
Investors’ focus now shifts to U.S. GDP data due Wednesday after Powell opened the door to four Fed rate increases this year, saying his personal outlook for the economy had strengthened. U.S. and European bond yields have soared in recent months amid speculation that the Fed’s monetary policy will be tightened at a faster pace, but for equity investors, that’s testing nerves. Global stocks are poised for their worst month since January 2016 after years of central-bank stimulus push up valuations.
“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, Fidelity International investment director, told Bloomberg TV. “The question is, despite all the upbeat data that we see coming out of the U.S., what is going to be the pace of these rate hikes and how quickly is it going to happen.”
Elsewhere, crude oil was little changed as the International Energy Agency warned about seemingly unstoppable U.S. shale production. Sterling added to yesterday’s decline as U.K. Prime Minister Theresa May squared off for a fight with the European Union over a Brexit deal.
Terminal users can read more in our markets blog.
Here are some key events scheduled for this week:
- Fed Chairman Powell testifies before the Senate Banking Committee Thursday. Other Fed speakers this week are Neel Kashkari and Bill Dudley.
- U.S. GDP and personal consumption data Wednesday may provide more clues about the state of the world’s biggest economy.
- In the euro region, investors will be watching manufacturing and jobs numbers Thursday.
- The European Union will publish a draft Brexit treaty on Wednesday and U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union.
- Japan capital spending is out on Thursday.
These are the main moves in markets:
Stocks
- The Stoxx Europe 600 Index fell 0.3 percent as of 10:37 a.m. London time.
- The U.K.’s FTSE 100 Index fell 0.3 percent.
- Germany’s DAX Index dipped 0.2 percent.
- Futures on the S&P 500 Index gained 0.2 percent.
- The MSCI Asia Pacific Index fell 1.1 percent.
- Japan’s Topix index fell 1.2 percent, Hong Kong’s Hang Seng dropped 1.6 percent, South Korea’s Kospi declined 1.2 percent.
- Australia’s S&P/ASX 200 Index declined 0.7 percent.
Currencies
- The Bloomberg Dollar Spot Index declined 0.1 percent.
- The euro dipped less than 0.05 percent to $1.2228, the weakest in almost six weeks.
- The British pound fell 0.2 percent to $1.3882.
- The Japanese yen climbed 0.3 percent to 107.06 per dollar.
Bonds
- The yield on 10-year Treasuries gained one basis point to 2.90 percent.
- Germany’s 10-year yield dipped one basis point to 0.68 percent.
- Britain’s 10-year yield decreased two basis points to 1.561 percent.
- Japan’s 10-year yield rose one basis point to 0.053 percent.
Commodities
- West Texas Intermediate crude increased 0.1 percent to $63.05 a barrel.
- Gold gained 0.2 percent to $1,320.44 an ounce.
— With assistance by Adam Haigh
