NEW YORK, Jan 28 — Stocks fell around the world yesterday as investors turned more cautious over stretched valuations and the economic impact of the Covid-19 pandemic, while the dollar rose on its safe-haven appeal.
Oil prices were little changed as demand concerns were mostly offset by a large drop in US crude inventories.
Stocks in the United States added to losses after the Federal Reserve left its key rate near zero and made no change to its monthly bond purchases, while flagging a potential slowdown in the pace of the economic recovery.
Wall Street had been weighed earlier by a slump in Boeing Co and by hedge funds dumping long positions to cover a short squeeze in GameStop Corp and AMC Entertainment.
“Fears are circulating that some investment funds might be quickly closing out positions as a way of shoring up their cash,” said David Madden, market analyst at CMC Markets UK.
“It is early days yet but we might see selling pressure ramp up for fear there could be a stampede for the exit.”
The Dow Jones Industrial Average fell 2.05 per cent, the S&P 500 lost 2.57 per cent and the Nasdaq Composite dropped 2.61 per cent.
MSCI’s benchmark for global equity markets fell 2.04 per cent to 652.5, while its index for emerging markets stocks fell 1.25 per cent.
The pan-European STOXX 600 index lost 1.16 per cent after the German government slashed its growth forecast for this year, while talk of further interest rate cuts by the European Central Bank hit banking stocks and the euro.
In currency trading, the dollar index rose 0.47 per cent, with the euro down 0.4 per cent to US$1.2111 (RM4.90).
“I think if anything the dollar is finding support from the Fed’s more cautious message,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
“I would say that the Fed having noted the recent moderation in the pace of the recovery is adding to concerns about the near-term outlook. The risk-off move today has gained traction in the Fed’s more cautious outlook for growth.”
The Japanese yen weakened 0.47 per cent versus the greenback at 104.09 per dollar.
In emerging markets, currencies in Russia, Brazil , Mexico, and South Africa all lost over 1 per cent on the day versus the greenback.
US Treasury yields slid in line with weaker stocks as risk appetite hit a wall.
“(The Fed) did sound a little bit more downbeat, a little bit more concerned about the pace of the recovery and the pace of progress on vaccinations as well,” said Gennadiy Goldberg, senior US rates strategist at TD Securities in New York.
“I think it’s meant to convey that they still realise there’s still quite a bit of weakness and that we’ve a long way to go before the recovery really takes off.”
Benchmark 10-year notes last rose 9/32 in price to yield 1.011 per cent, from 1.04 per cent late on Tuesday.
In commodities markets, oil prices were little changed despite a massive drawdown in US crude inventories, as ongoing concerns about the coronavirus pandemic tempered buying interest.
Brent crude futures fell US$0.42 to US$55.49 a barrel. US crude futures slid US$0.04 to US$52.57 a barrel.
Gold prices fell, pressured in part by the dollar strength.
Spot gold dropped 0.5 per cent to US$1,841.13 an ounce. Silver fell 1.13 per cent to US$25.16.
Bitcoin last fell 3.91 per cent to US$31,234.68. — Reuters
