LONDON, May 18 ― Stock markets across the world fell today as traders awaited Federal Reserve policy minutes for clues on the outlook for US interest rates.
The minutes from the Fed’s April meeting will be scoured for indications that a raise in US interest rates could be back on the table at the June meeting as the markets begin to take more seriously the possibility of more than one rate hike this year.
Asian stock markets mostly fell after a two-day rally, taking the baton from Wall Street which had fallen overnight as strong US economic data fuelled talk of a rate rise as soon as next month.
Wall Street reopened modestly lower today, with the Dow down 0.4 per cent after five minutes of trading, as traders remained focused on the Fed minutes.
In Europe, London’s benchmark FTSE 100 index was down 0.7 per cent compared with yesterday’s close in afternoon trading.
In the euro zone, Frankfurt’s DAX 30 shed 0.5 per cent and the Paris CAC 40 dropped 0.4 per cent in value.
Traders in Europe shrugged off economic data in line with market expectations and that showed Britain’s unemployment rate steady at 5.1 per cent and an easing to euro zone inflation.
“European markets slipped... as the rising threat of a US rate hike in June hit confidence, whilst the price of oil gave up yesterday’s gains,” said Jasper Lawler, market analyst at traders CMC Markets.
“The suggestion there could be two-three rate rises this year from Fed officials have markets worried.”
In Asia, data revealed that the world’s number three economy Japan expanded 0.4 per cent in the first three months of the year, boosted by a pick-up in consumer spending.
The country’s benchmark Nikkei stock index spent much of the day in positive territory. But the upbeat GDP figure was offset by fears it could allow the Bank of Japan to delay any fresh stimulus.
Equities not attractive
Most Asian markets retreated after a sharp sell-off on Wall Street Tuesday, traders said. US investors ran for cover after news that industrial production, consumer prices and housing starts all rose in April ― fuelling speculation the Federal Reserve could raise borrowing costs as soon as next month.
“It’s been some time coming but it seems the markets are finally waking up to the idea that the Fed could raise interest rates before the end of the year, even more than once,” said Craig Erlam, senior market analyst at Oanda trading group.
Wall Street sentiment was also hobbled today by Goldman Sachs downgrading stocks to neutral for the next 12 months on valuation and growth worries.
“Until we see sustained earnings growth, equities do not look attractive, especially on a risk-adjusted basis,” Goldman said in the note.
In foreign exchange activity, the euro declined against the dollar.
Key figures around 1330 GMT
London - FTSE 100: DOWN 0.7 per cent at 6,121.87 points
Frankfurt - DAX 30: DOWN 0.5 per cent at 9,840.51
Paris - CAC 40: DOWN 0.4 per cent at 4,280.20
EURO STOXX 50: DOWN 0.4 per cent at 2,925.37
New York - Dow: DOWN 0.4 per cent at 17,452.39
New York - S&P 500: DOWN 0.4 per cent at 2,040.07
New York - Nasdaq: DOWN 0.2 per cent at 4,708.33
Tokyo: Nikkei 225: DOWN 0.1 per cent at 16,644.69 (close)
Shanghai - Composite: DOWN 1.3 per cent at 2,807.51 (close)
Hong Kong - Hang Seng: DOWN 1.5 per cent at 19,826.41 (close)
Euro/dollar: DOWN at US$1.1274 from from US$1.1313 yesterday
Dollar/yen: UP at ¥109.51 from ¥109.13. ― AFP
