por admin » Mar Ago 16, 2016 7:03 am
Dollar Weighs on Stocks in Europe and Japan
Stocks pulled back Tuesday following a record finish on Wall Street, while the dollar retreated sharply against the euro, yen and pound.
The Stoxx Europe 600 fell 0.5% late morning, following a 1.6% drop in Japanese equities, as a weaker dollar dragged down shares of exporters.
Futures pointed to a 0.2% opening loss for the S&P 500, after the Dow Industrials, S&P and Nasdaq Composite Index all closed at all-time highs for the second time in a week.
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The greenback was broadly weaker Tuesday after a paper released by Federal Reserve Bank of San Francisco President John Williams suggested a possible increase to the inflation target, which would give the bank room to keep rates lower for longer.
The British pound inched up 0.1% against the dollar after hitting its lowest level in over three decades on Monday.
The British pound inched up 0.1% against the dollar after hitting its lowest level in over three decades on Monday.Photo: Zuma Press
“The letter provides further evidence that Fed officials are becoming more pessimistic over the medium to long-term outlook for the U.S. economy,” said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi.
The euro was up 0.8% against the dollar at $1.1269, while the dollar fell 1.1% against the yen to ¥100.0190, dragging down Japan’s export-heavy auto sector.
Analysts said there was no clear catalyst for the yen’s steep appreciation, although thin trading volumes and stop-loss orders exaggerated its magnitude.
The British pound rose 0.7% against the dollar to $1.2973 after hitting its lowest level in over three decades on Monday. Sterling nudged higher after U.K. inflation figures released in morning trade showed a 0.6% rise in July’s Consumer Price Index, narrowly beating expectations.
The export-heavy auto sector led declines in European equities. Shares of Volkswagen were down 1.6% following reports that U.S. prosecutors and Volkswagen AG are negotiating a settlement after the Justice Department found evidence of criminal wrongdoing in the car company’s diesel-emissions cheating.
Europe’s mining sector rose sharply, however, with shares of Antofagasta PLC up 7% despite reporting a fall in first-half net profit as the copper producer reaffirmed expectations for higher output this year. Shares of BHP Billiton PLC climbed 3.3% despite swinging to its worst-ever loss.
The Shanghai Composite Index also fell 0.5% as investors sold shares of banks and insurance companies, while Hong Kong’s Hang Seng Index ended flat.
Following a slow summer climb in stock markets, some investors are growing weary of the recent rally as the earnings season nears its finish.
“I’m usually a guy who sees the glass as half full, and have been positive for most of this recovery, but I am concerned now,” said Mattias Sundling, equity strategist at Danske Bank.
Weak earnings momentum is likely to trigger a correction in stock markets, he said, as the market has climbed higher without a buildup in earnings growth.
But many suggest a lack of alternatives and ultra-supportive central bank policy should keep investors in the stock market even if earnings disappoint.
For investors, “the focus seems to be on the heavy lifting that is being done by monetary policy,” said Koen Straetmans, a multiasset strategist at NN Investment Partners.
Ultralow and in some cases negative interest rates are forcing investors to take on risky assets, including stocks, he said.
The yield on the 10-year U.S. Treasury note fell to 1.524% from 1.554% on Monday.
Inflation data out of the U.S. will be closely watched later Tuesday. Economists forecast a 0.2% rise in core consumer prices, hampered by low oil prices and slow economic growth.
In commodities, Brent crude oil swung between small gains and losses and last traded up 0.4% at $48.56 a barrel after three days of gains.
Metals prices were mostly higher, with copper prices up 1% in London at $4,821 a ton. Gold rose 0.7% to $1,356 an ounce.
—Mike Spector and Hiroyuki Kachi contributed to this article