Dubai: Global stocks were hamstrung by dialled-down expectations for a larger US rate cut this month. The US futures rose.
MSCI’s broad index of world stocks slipped 0.1 per cent, pulling further away from the near-year-and-a-half high reached earlier in June after falls in much of Asia. Europe’s regional STOXX 600 index was treading water, Germany’s DAX and France’s CAC rose 0.2 per cent and Britain’s FTSE jumped 0.4 per cent.
The Dow Jones Industrial Average futures was up 0.17 per cent at 27,176. The S&P 500 Futures contract was 0.23 per cent higher at 2,983.75.
Meanwhile, investors were shunning real estate stocks that would benefit from lower interest rates and defensive sectors such as utilities and telecoms ahead of a big week for earnings.
“Sentiment about company earnings potential appears to be mixed at best, with some evidence that we might be seeing a bit of a pickup in economic data, after a slow first half of the year,” said Michael Hewson at CMC Markets.
“The pickup in US economic data last week, as well as contradictory commentary from Fed officials, appears to be muddying the waters for investors about the possible reaction function of the US Federal Reserve at the end of this month and whether we can expect to see a 25 basis point or 50 basis point rate cut.” Momentum looked better for Wall Street. US futures pointed to a 0.3 per cent to 0.5 per cent higher open.
Global stocks rose towards the end of last week after dovish comments by New York Fed President John Williams boosted expectations the world’s top central bank would lower rates by 50 basis points at its July 30-31 meeting.
They gave back those gains and Wall Street shares fell after the New York Fed walked back Williams’ comments by saying his speech was not about upcoming policy action.
Hopes for a larger cut were curtailed even more after the Wall Street Journal reported the Fed was likely to cut rates by 25 bps this month, and may trim further in the future given global growth and trade uncertainties.
The dollar inched higher and US Treasury yields held steady on the greater likelihood of a shallower rate cut. The dollar index gained to 97.193 against a basket of six major currencies after rising 0.4 per cent on Friday.
The euro was little changed at $1.1219 after shedding 0.5 per cent on Friday. The dollar edged up 0.16 per cent to 107.86 yen.
The benchmark 10-year Treasury yield lingered at 2.0429 per cent. Still, the pressure on equity markets limited the rise in safe-haven Treasury yields.
“Market direction will be driven increasingly by macro economic data; central bank policy responses are in the prices already and earnings are unable to lift the equity markets so the dynamics will be economic data and the concerns about geopolitical risks and trade,” said Larry Hatheway, head of GAM Investment Solutions & Chief Economist in Zurich.
“The market will struggle to find direction until autumn and we may have another pullback in capital markets.”