NEW YORK, Feb 22 — Global equity markets fell while US Treasury yields hit new highs yesterday as investors weighed the prospects of a longer-than-anticipated stiff monetary policy stance by the Federal Reserve following continued strong economic data.
Market sentiment has remained bearish after Fed officials signalled last week that the US central bank was likely to keep raising interest rates for longer than was previously forecast in its bid to tame inflation.
The Fed will release the minutes of its last meeting today, which will give traders a glimpse of how high officials are projecting interest rates will go after recent data showed stronger-than-expected US employment and consumer prices.
A survey released yesterday showed that US business activity unexpectedly rebounded in February, reaching its highest level in eight months, and reaffirming the resilience of the US economy despite the Fed’s monetary policy actions.
Benchmark 10-year note yields jumped to the highest since November 10 and were at 3.9584 per cent. The yield curve between two-year and 10-year notes remained deeply inverted at minus 78 basis points, indicating heightened concerns over an impending recession.
“The Fed has a conundrum because as long as people are working, they spend money on specific things that’s rotating like travel, home improvement, etc.,” said Tom Plumb, portfolio manager at Plumb Balanced Fund in Madison, Wisconsin.
“Anytime the market tries to convince itself that the Fed will take its foot off the brakes sometime soon, they get slapped with reality that it’s probably not going to happen for the next six months or so,” Plumb added.
The MSCI world equity index, which tracks shares in 50 countries, was down 1.59 per cent. European stocks fell as much as 1 per cent before clawing back some of their losses, and closed down 0.19 per cent.
On Wall Street, all three major indexes ended lower, led by selloffs in technology, consumer discretionary, industrials and financial stocks. The Dow Jones Industrial Average fell 2.06 per cent to 33,133.34, the S&P 500 lost 2.01 per cent to 3,997.39 and the Nasdaq Composite dropped 2.50 per cent to 11,492.55.
Oil prices slipped in a volatile session as persistent concerns about global economic growth outweighed supply curbs and prompted investors to take profit on the previous day’s gains.
Brent crude settled 1.2 per cent lower at US$83.05 (RM370.11) per barrel, while the US West Texas Intermediate crude (WTI) for March, which expires yesterday, fell 0.2 per cent to US$76.16 per barrel. The second-month contract slipped 0.38 per cent to US$76.16 a barrel.
The dollar rose against most major currencies amid data showing the strengthening of the US economy. The dollar index was trading up at 0.289 per cent. The euro was down 0.37 per cent at US$1.0642 as it came under pressure after data showed euro zone manufacturing activity deteriorated.
Gold prices dropped as the dollar edged higher and bond yields rose. Spot gold dropped 0.4 per cent to US$1,834.50 an ounce, while US gold futures fell 0.32 per cent to US$1,834.50 an ounce. — Reuters
