The MSCI global stock index lost ground on Wednesday following weaker-than-expected overseas data and as investors watched escalating US-China trade tensions ahead of upcoming US economic and second-quarter data.
Investors shrugged at the minutes of the US Federal Reserve meeting released Wednesday that showed the Fed was united in the June meeting’s decision to hold interest rates steady to buy time to assess whether further hikes are needed would be. The minutes also showed that most members eventually expected more policy tightening.
“If we continue to see inflation cooling, there may not be any further rate hikes, but nothing was said about that in the Fed minutes,” said Michael James, director of equity trading at Wedbush Securities in Los Angeles. “We will feel much better when we get another major data point next week with the jobs report and inflation data.”
A damper on foreign equities was the release of a previous survey that showed China’s services sector – which had recovered since the lifting of COVID-19 lockdowns – grew at its slowest pace in five months in June, contributing to signs of a recovery. a faltering recovery in the world’s second-largest economy.
A spokesman for the US Department of Commerce said Wednesday that the United States “resolutely” opposes export controls China announced Monday on gallium and germanium, and that Washington will consult with its partners and allies. Companies raced to secure supplies for August 1. deadline following China’s abrupt decision to restrict exports of two metals commonly used in semiconductors and electric vehicles.
“If you look at the global level, all the things that came out (from China and Europe) show you that growth is still slowing down and you have the geopolitical backdrop between the US and China that’s going to be a bit of a headache. ” said Jack Janasiewicz, chief portfolio strategist at Natixis Investment Managers Solutions.
Yields on longer-dated US government bonds changed little after the Fed’s minutes. Yields rose slightly after a lower-than-expected reading of US manufactured goods and rose steadily in afternoon trading, with little reaction to the Fed’s minutes.
Investors were cautious after returning from Tuesday’s US Independence Day
While the Fed is widely expected to raise rates again in July, investors will look to upcoming data, such as inflation data and the second-quarter corporate earnings season, for clues to the Fed’s interest rate plans later this year.
The Dow Jones Industrial Average fell 106.59 points, or 0.31%, to 34,311.88, the S&P 500 lost 4.83 points, or 0.11%, to 4,450.76, and the Nasdaq Composite fell 8.11 points , or 0.06%, to 13,808.66.
The pan-European STOXX 600 index was down 0.73% and MSCI’s international measure of equities fell 0.40% and was on track to break a six-session winning streak.
Emerging market equities lost 0.80%. MSCI’s broadest index of Asia-Pacific stocks outside Japan closed 0.93% lower, while Japan’s Nikkei lost 0.25%.
Traders are betting on an 88.7% chance that the Fed will raise rates by a quarter of a percentage point in July after a pause last month, but have priced in only a 17.7% chance, according to the CME Group’s FedWatch tool. another interest rate hike in September.
The US dollar weakened slightly after the Fed gained ground minutes earlier to reach its session high.
The dollar index rose 0.281%, while the euro fell 0.23% to $1.0852.
The Japanese yen weakened 0.16% against the greenback at $144.68 per dollar, while Sterling last traded at $1.2695, down 0.13% on the day.
Benchmark 10-year bonds rose 8.7 basis points to 3.945%, from 3.858% late Monday. The 30-year bond last rose 6.9 basis points to 3.9462%, from 3.877%. The 2-year bond was last up 1.3 basis points to 4.9529%, from 4.94%.
US crude gained ground, narrowing the price differential against global benchmark Brent in a reaction following the July 4 holiday to supply restrictions announced Monday by top oil exporters Saudi Arabia and Russia.
And market participants waited for demand data from the weekend, which tends to mark the peak season in the US.
US crude rose 2.87% to $71.79 a barrel and Brent fell to $76.65, up 0.52% on the day.
(This story has not been edited by News18 staff and was published from a syndicated news agency feed – Reuters)