MSCI’s global equities index fell more than 1 per cent yesterday after nine straight days of gains while Treasury yields fell as US economic data beat expectations and UK inflation slowed at a rate that took markets by surprise.
Oil prices settled slightly higher after hitting their highest level in nearly three weeks, as traders dealt with worries about disruptions in the Red Sea after Yemen’s Iran-aligned Houthi militants stepped up attacks on commercial ships.
The dollar rose against other major currencies, while sterling fell sharply after UK inflation plunged in November to its lowest rate in more than two years at 3.9 per cent. That was far lower than the 4.4 per cent economists polled by Reuters had expected, making it less of an outlier globally.
US existing home sales rose unexpectedly in November. And, amid optimism about the labour market, the Conference Board said its consumer confidence index increased to 110.7 this month comparing well to economist expectations for 104.0 and November’s downwardly revised 101.0.
Investors at first reacted positively to the data but the S&P 500 lost steam in afternoon trading, ending the session down 1.5 per cent after coming within 0.4 per cent of its record high reached in January 2022.
“There’s been a significant amount of complacency. And once you weren’t making meaningful inroads to higher highs through lunch today a little bit of selling got us to negative on the day,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
“As soon as things went negative, you saw some programmes come in and an absence of buyers created an air pocket to the downside,” said James.
Earlier, Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute in Charlottehad said the data was suggesting that the economy was “headed toward a softish landing,” causting the dip in bond yields and investor buying of equities in economically sensitive sectors such as energy.
MSCI’s gauge of stocks across the globe shed 0.91 per cent after rising earlier in the day. Yesterday’s decline snapped a nine-session winning streak for the index.
On Wall Street, the Dow Jones Industrial Average fell 475.92 points, or 1.27 per cent, to 37,082, the S&P 500 lost 70.02 points, or 1.47 per cent, to 4,698.35 and the Nasdaq Composite dropped 225.28 points, or 1.5 per cent, to 14,777.94.
In US Treasuries US 10-year Treasury yields fell to an almost five-month month low as government bond yields fell globally after the British inflation data.
Benchmark 10-year notes were down 6.7 basis points to 3.855 per cent, from 3.922 per cent late on Tuesday. The 30-year bond was last down 4.7 basis points to yield 3.9889 per cent, from 4.036 per cent. The 2-year note was last was down 9.5 basis points to yield 4.3418 per cent, from 4.437 per cent.
In currencies, the dollar strengthened against sterling after the UK inflation data fuelled speculation of rate cuts by the Bank of England. Sterling GBP= was last trading at US$1.2637, down 0.73 per cent on the day.
The dollar index rose 0.284 per cent, with the euro down 0.36 per cent to US$1.0941. The Japanese yen strengthened 0.19 per cent versus the greenback at 143.56 per dollar,
In commodities, global oil benchmark Brent hovered above US$80 a barrel amid jitters over global trade disruption and geopolitical tensions in the Middle East following attacks on ships in the Red Sea by Yemen’s Iran-aligned Houthi forces.
US crude settled up 0.38 per cent at US$74.22 per barrel and Brent settled at US$79.70, up 0.59 per cent on the day.
In precious metals, spot gold dropped 0.4 per cent to US$2,031.61 an ounce. US gold futures fell 0.27 per cent to US$2,034.50 an ounce. — Reuters
