NEW YORK: Shares in Europe followed Asian and U.S. benchmarks lower as Federal Reserve Chairman Jerome Powell’s upbeat assessment of the world’s biggest economy continued to reverberate through global markets.
Global stocks extend selloff; Treasuries Steady
Miners led a decline in the Stoxx Europe 600 gauge after lower-than-expected Chinese manufacturing data added to the malaise over equities. The MSCI Asia Pacific Index dropped along with most national benchmarks in the region. Treasury yields held near a four-year high and the dollar was steady after Tuesday’s jump. The euro slipped, while German bunds edged higher.
Investors’ focus now shifts to U.S. GDP data due Wednesday after Powell opened the door to four Fed rate increases this year, saying his personal outlook for the economy had strengthened. U.S. and European bond yields have soared in recent months amid speculation that the Fed’s monetary policy will be tightened at a faster pace, but for equity investors, that’s testing nerves. Global stocks are poised for their worst month since January 2016 after years of central-bank stimulus push up valuations.
“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, Fidelity International investment director, told Bloomberg TV. “The question is, despite all the upbeat data that we see coming out of the U.S., what is going to be the pace of these rate hikes and how quickly is it going to happen.”
Elsewhere, crude oil crept lower as the International Energy Agency warned about seemingly unstoppable U.S. shale production. Sterling held yesterday’s decline as U.K. Prime Minister Theresa May squared off for a fight with the European Union over a Brexit deal.