Global stocks mostly fell today as comments from Federal Reserve officials strengthened expectations of an interest rate increase this year and economic indicators showed muted growth in Europe.
In Europe, Britain’s FTSE 100 lost 0.4 per cent to 7,047 and France’s CA 40 retreated 0.5 per cent to 4,483. Germany’s DAX dropped 0.4 per cent to 10,572. Futures augured small gains on Wall Street, with Dow and S&P futures both up 0.2 per cent.
Comments by several Fed officials strengthened investor expectations that the central bank would increase rates this year.
Federal Reserve Bank of Richmond President Jeffrey Lacker said rates need to be increased to keep inflation under control, echoing the view held by Cleveland Federal Reserve President Loretta Mester, who said in an interview with Bloomberg that the economy is ripe for an interest rate increase.
The Fed is expected by most investors to wait until December to raise rates.
“We think Cleveland Fed President Mester’s reiteration of her hawkishness caused investors to re-interpret the implications of the previous day’s manufacturing ISM report as signaling an increased likelihood of a December rate hike,” Tim Condon, head of research in Asia at ING in Singapore, said, referring to the Institute for Supply Management manufacturing index.
The index rose to 51.5 in September from 49.4 in August, indicating that US manufacturing rebounded last month.
Market sentiment was also weighed down by reports showing business activity slowed slightly in the eurozone in September.
IHS Markit’s purchasing managers’ index, a broad gauge of economic activity, edged down to a 20-month low of 52.6 points from 52.9 the previous month. That indicates muted quarterly growth of 0.3 per cent.
Earlier this week, the International Monetary Fund lowered its forecast for the US economy this year to 1.6 per cent from the 2.2 per cent it had predicted in July. It left unchanged its forecast for global growth this year at 3.1 per cent. But the world’s advanced economies are expected to grow 1.6 per cent this year, down from the 1.8 per cent the fund forecast in July, pulled down by the United States slowdown.
Most Asian markets finished lower. South Korea’s Kospi finished 0.1 per cent lower at 2,053.00. Australia’s S&P/ASX 200 was down 0.6 per cent to 5,452.90. But Hong Kong’s Hang Seng index gained 0.4 per cent to 23,788.31. Helped by a weaker yen, Japan’s Nikkei 225 finished 0.5 per cent higher at 16,819.24. Stocks in Southeast Asia and New Zealand finished lower. China’s Shanghai Composite Index was closed for a holiday.
US benchmark crude oil added 93 cents to USD 49.62 per barrel in New York. The contract fell 12 cents yesterday. Brent crude, the international standard, advanced USD 1.00 to USD 51.87 a barrel in London.
The euro strengthened to USD 1.1212 from USD 1.1207 and the dollar rose to 102.91 yen from 102.85.