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Global stocks mostly fall after Fed, Bank of England statements
NEW YORK, May 3, 2019 (BSS/AFP) – Global stocks mostly fell Thursday as
markets digested comments from the Federal Reserve that dimmed hopes for a
cut in US interest rates.
Stocks retreated in London after the Bank of England pointed to the
prospects of hiking interest rates more quickly than expected and in New
York, where oil-linked shares were especially weak amid a slide in crude
prices.
Traders were jolted by Fed boss Jerome Powell’s assessment Wednesday of
recent weakness in US inflation as only “transitory.”
The comments came after the Fed’s latest policy meeting and sank hopes
that the US central bank would announce a rate cut later in the year.
The remarks from Powell also went against a call from US President Donald
Trump to ease borrowing costs to help bolster the economy.
“The transitory Fed brought a transitory market pullback,” said Adam
Sarhan of 50 Park Investment. “It will pass.”
Sarhan also rated Thursday’s decline, which followed Wednesday’s dip, as
unsurprising given the market’s nearly unbroken run higher through the first
four months of 2019.
“It’s normal to see some profit taking,” Sarhan said.
Adding to fatigue with the rally are seasonal factors, with the market
historically pulling back in May, a trend that inspired the adage: “Sell in
May and go away.”
– British rate hikes ahead? –
Meanwhile, the Bank of England on Thursday raised its forecast for British
economic growth this year to 1.5 percent from 1.2 percent, as stockpiling
offsets lower business investment elsewhere ahead of Brexit.
Governor Mark Carney later told a news conference that rates would have to
increase more quickly than markets currently anticipate — if the predictions
proved correct.
“If something like this forecast comes to pass, we could see a period
where the economy is growing and pressures continue to build despite this
uncertainty,” Carney said.
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“If a Brexit resolution is some form of arrangement with some smooth
resolution to it, it will require rate increases, and more frequent rate
increases than the market currently expects,” he added.
The pound strengthened somewhat against the euro, but fell against the
dollar, while London’s FTSE 100 declined 0.5 percent.
Oil prices meanwhile extended losses Thursday after data Wednesday showed
US crude inventories and production had jumped.
“Oil has sold-off on the back of yesterday’s Energy Administration
Information report, which showed that US oil inventories surged by 9.9
million barrels — its largest since September 2017,” noted David Madden,
analyst at CMC Markets UK.
Markets are also looking ahead to the US government jobs report for April,
due out on Friday.
Analysts expect the US economy added another 200,000 jobs last month while
the unemployment rate held steady at 3.8 percent.
– Key figures around 2050 GMT –
New York – Dow: DOWN 0.5 percent at 26,307.79 (close)
New York – S&P 500: DOWN 0.2 percent at 2,917.52 (close)
New York – Nasdaq: DOWN 0.2 percent at 8,036.77 (close)
London – FTSE 100: DOWN 0.5 percent at 7,351.31 (close)
Frankfurt – DAX 30: FLAT at 12,345.42 (close)
Paris – CAC 40: DOWN 0.9 percent at 5,538.86 (close)
EURO STOXX 50: DOWN 0.7 percent at 3,488.93 (close)
Hong Kong – Hang Seng: UP 0.8 percent at 29,944.18 (close)
Shanghai – Composite: Closed for holiday
Tokyo – Nikkei 225: Closed for holiday
Euro/dollar: DOWN at $1.1173 from $1.1196 at 2100 GMT
Pound/dollar: DOWN at $1.3034 from $1.3050
Euro/pound: DOWN at 85.73 from 85.79 pence
Dollar/yen: UP at 111.50 from 111.38
Oil – Brent Crude: DOWN $1.43 at $70.75 per barrel
Oil – West Texas Intermediate: DOWN $1.79 at $61.81 per barrel
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