London: World stocks hit a one-week low Wednesday while US stock futures pointed to a steady open as investors looked to congressional testimony from Federal Reserve chairman Ben Bernanke for more clarity on interest rates.
Investors remained wary after Tuesday's sharp drop in US consumer confidence and a fall in German business sentiment. US consumer confidence in February slumped to a 10-month low as the short-term outlook on jobs worsened.
Bernanke was to give his semi-annual testimony on monetary policy and the state of the economy before the US House Financial Services Committee later yesterday. Investors were keen to hear if a surprise hike in the discount rate last week could bring forward broader policy tightening a move that would be negative for risky assets such as stocks.
"The move to lift the discount rate was clearly the first step into a tightening mode," said Heino Ruland, strategist at Ruland Research, in Frankfurt.
"Combined with the rather disappointing consumer sentiment numbers (Tusday), people are just afraid that any tightening by the Fed might effectively kill the recovery which is still at a very early stage."
World stocks as measured by MSCI fell 0.3 per cent while the pan-European FTSEurofirst 300 index of top shares lost 0.1 per cent.
US stock futures were unchanged on the day, pointing to a steady open on Wall Street.
"I think what Bernanke says today will govern the direction of markets for the next five weeks at least," said Howard Wheeldon, a strategist at BGC Partners.
Various Fed officials have sought to allay fears of early policy tightening. Interest rate futures fully price in a chance that the Fed would raise the cost of borrowing in November.
"There's ... some nervousness about what Bernanke is going to say today," said Johan Javeus, chief currency strategist at SEB in Stockholm.
The Fed needed to outline the significance of last week's raising of the Fed's discount rate for monetary tightening, Javeus said.
The dollar was slightly lower against major currencies. The euro was at a near nine-month low versus the dollar at $1.3544.
The bund future rose 30 ticks. The yield premium that investors demand to buy 10-year Greek government bonds rather than German benchmarks rose to 347 basis points, its widest since February 9.
