Global stocks declined broadly, led by European equities which fell for the first time this week, suffering their biggest fall in three weeks, while currency markets continued their subdued tone even as the recent 4-day rally in the USD appears to have topped out, as investors took to sidelines ahead of the Jackson Hole meeting which begins tonight. Japanese and Chinese stocks had suffered modest drops in Asia. S&P 500 Index futures slipped 0.2%, continuing yesterday’s modest selloff.
Stubbornly low oil prices and warnings about steel demand kept the pressure on miners, while pharma stocks were also hit with traders citing social media comments from U.S. presidential candidate Hilary Clinton chastising EpiPen price hikes
A rally that’s driven global equities to their highest level in a year has petered out as the prospect of higher U.S. rates risks thwarting efforts by other central banks to stimulate growth by cutting borrowing costs. While German business confidence dropped to the lowest level in six months in August, a U.S. report on Thursday will probably show a pickup in durable goods orders.
Once again, all attention remains focused on the Jackson Hole symposium which begins tonight with a speech by the Kansas Fed’s George. “There is renewed caution ahead of Yellen’s appearance at Jackson Hole tomorrow,” said Michael Ingram, a market strategist at BGC Partners in London. “It won’t take a great deal for sentiment to turn from glass half full to glass half empty.” Michael Hewson of CMC Markets said that “there is basically just a bit of risk aversion ahead of Jackson Hole. I think expectations are way too high, though, I don’t think Yellen sets as much importance on Jackson Hole as Ben Bernanke did.”
Equity markets retreated in Europe after the August Germany IFO data fell, printing weaker than survey estimates, which called for increases; the drop was broad-based, across business climate, current assessment and expectations components.”Business confidence in Germany has clearly worsened,” Ifo head Clemens Fuest said in a statement. “The German economy has fallen into a summer slump.”
Iron ore fell on the prospect of shrinking steel production in China and crude oil traded near a one-week low. The Bloomberg Dollar Spot Index snapped a four-day winning streak as investors await comments by Federal Reserve Chair Janet Yellen at a symposium in Jackson Hole, Wyoming, on Friday.
In Asian equities, Japan’s Nikkei ended down 0.3 percent following on from losses on Wall Street overnight. Chinese stocks fell 1 percent to extend their slide this week as investors took profit on recent red hot property shares which dropped 2 percent. Banks stumbled too ahead of earnings and a crackdown on some lending practices. “The whole (property) sector had surged more than 20% at one point this month, and falls in share prices this morning were purely a result of investors’ trading strategy as they want to lock in profits,” said Joe Qiao, a Shanghai-based analyst at Xiangcai Securities.
Europe’s Stoxx 600 slid 0.8% in early trading. Glencore Plc and Anglo American Plc led a gauge of miners to the worst performance on the equity gauge as iron ore retreated. Total SA dragged energy producers lower as oil held near its lowest close in a week. Jimmy Choo Plc jumped 5.3 percent after the maker of luxury shoes posted higher first-half revenue and earnings and said it remains optimistic on this year’s prospects. CRH Plc rose 2.6 percent after the Irish construction company posted higher-than-expected first-half sales and profit.
S&P 500 Index futures slipped 0.2%, after a late selloff in drug-makers helped drag U.S. equities down 0.5 percent on Wednesday. HP Inc. (HPQ) dropped 6.7 percent in early New York trading after the seller of personal computers and printers forecast fiscal fourth-quarter profit that may fall short of analysts’ estimates.
West Texas Intermediate crude rose 0.3% to $46.89 a barrel on the back of the dollar’s modest decline. It dropped 2.8% in the last session as data showed U.S. inventories unexpectedly rose last week.
2Y Treasuries were little changed with their yield at a two-month high of 0.76%. The securities are the cheapest they’ve been relative to 30-year notes since the start of 2008 following a run of hawkish comments from Fed officials including Vice Chairman Stanley Fischer and the heads of the New York and San Francisco branches. The rate on 10-year Treasuries fell one basis point to 1.55%. Fed fund futures indicate a 54 percent chance of a U.S. interest-rate hike this year, up from 36 percent at the start of August. The yen was little changed at 100.37 per dollar and South Korea’s won gained 0.6 percent.
* * *
Market Snapshot
