Stocks Under Pressure as Dollar Pauses; Pound Dips: Markets Wrap

Global stocks took another leg down on Thursday in the wake of Federal Reserve minutes that painted a healthy picture of the world’s biggest economy, raising the prospect of tighter monetary policy. U.S. futures managed to reverse a decline, however, while the dollar edged lower as Treasuries rose.

The Stoxx Europe 600 Index slid as almost all the major national equity gauges in the region fell. Earlier in Asia most shares retreated, though China’s market bucked the trend as it reopened after a holiday. The Treasury move pared some of Wednesday’s slide following the minutes from the Fed’s January meeting, which showed increasing confidence growth will pick up despite concerns around inflation.

“The market is pricing in the possibility of a tighter Fed over time,” Evan Brown, director at UBS Asset Management, who previously worked on the open market trading desk at the New York Fed, told Bloomberg TV in New York. On a day-to-day basis “you’re going to see volatility, you’re going to see equities get a little skittish when yields are rising, but as you look over the long term, fundamentals on the economy are very strong,” he said.
For now, markets remain fragile. February is shaping up as one of the worst months for global equities in more than a year as concerns about a pick-up in inflation and expensive stock prices outweigh evidence of a buoyant U.S. economy. With recent data underpinning the view that inflation is no longer lagging, the OIS space shows traders pricing in just shy of three U.S. rate hikes over the next 12 months.

Elsewhere, gold retreated alongside most commodities. The pound was weaker as data showed the U.K. economy expanded less than previously estimated in the fourth quarter.

Terminal users can read more in our markets blog.

Here are some key events scheduled for this week:

U.K. PM Theresa May is locking down her ministers in a bid to agree what kind of post-Brexit trade deal they want from the EU.
Fed policy makers still due to speak include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic.
Companies announcing earnings include Woolworths and Royal Bank of Scotland.
These are the main moves in markets:

Stocks
The Stoxx Europe 600 Index decreased 0.6 percent as of 7:36 a.m. New York time.
Futures on the S&P 500 Index rose 0.3 percent, the biggest advance in a week.
The MSCI Asia Pacific Index dipped 0.8 percent to the lowest in more than a week.
The U.K.’s FTSE 100 Index sank 0.9 percent on the biggest dip in almost two weeks.
The MSCI Emerging Market Index sank 1 percent, the largest tumble in almost two weeks.
Currencies
The Bloomberg Dollar Spot Index decreased less than 0.05 percent, the first retreat in a week.
The euro gained less than 0.05 percent to $1.2287, the largest advance in a week.
The British pound fell 0.2 percent to $1.3887 on its fifth consecutive decline.
The Japanese yen gained 0.5 percent to 107.25 per dollar, the first advance in a week.
South Africa’s rand sank 0.5 percent to 11.7193 per dollar.
The MSCI Emerging Markets Currency Index sank 0.4 percent on the largest decrease in two weeks.
Bonds
The yield on 10-year Treasuries dipped two basis points to 2.93 percent.
Germany’s 10-year yield decreased one basis point to 0.71 percent.
Britain’s 10-year yield rose one basis point to 1.555 percent.
Commodities
West Texas Intermediate crude sank 0.3 percent to $61.48 a barrel on the largest decrease in almost two weeks.
Gold fell 0.1 percent to $1,323.54 an ounce, reaching the weakest in more than a week on its fifth consecutive decline.