Global Stocks Extend Selloff; Treasuries Steady: Markets Wrap

• February 27 2018
• Robert Brand

Shares in Europe followed Asian and U.S. benchmarks lower as Federal Reserve Chairman Jerome Powell’s upbeat assessment of the world’s biggest economy continued to reverberate through global markets.

Shares in Europe followed Asian and U.S. benchmarks lower as Federal Reserve Chairman Jerome Powell’s upbeat assessment of the world’s biggest economy continued to reverberate through global markets.

Miners led a decline in the Stoxx Europe 600 gauge after lower-than-expected Chinese manufacturing data added to the malaise over equities. The MSCI Asia Pacific Index dropped along with most national benchmarks in the region. Treasury yields held near a four-year high and the dollar was steady after Tuesday’s jump. The euro slipped, while German bunds edged higher.

Investors’ focus now shifts to U.S. GDP data due Wednesday after Powell opened the door to four Fed rate increases this year, saying his personal outlook for the economy had strengthened. U.S. and European bond yields have soared in recent months amid speculation that the Fed’s monetary policy will be tightened at a faster pace, but for equity investors, that’s testing nerves. Global stocks are poised for their worst month since January 2016 after years of central-bank stimulus push up valuations.

“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, Fidelity International investment director, told Bloomberg TV. “The question is, despite all the upbeat data that we see coming out of the U.S., what is going to be the pace of these rate hikes and how quickly is it going to happen.”

Elsewhere, crude oil crept lower as the International Energy Agency warned about seemingly unstoppable U.S. shale production. Sterling held yesterday’s decline as U.K. Prime Minister Theresa May squared off for a fight with the European Union over a Brexit deal.

Terminal users can read more in our markets blog.

Here are some key events scheduled for this week:

• Fed Chairman Powell testifies before the Senate Banking Committee Thursday. Other Fed speakers this week are Neel Kashkari and Bill Dudley.
• U.S. GDP and personal consumption data Wednesday may provide more clues about the state of the world’s biggest economy.
• In the euro region, investors will be manufacturing and jobs numbers Thursday.
• The European Union will publish a draft Brexit treaty on Wednesday and U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union.
• Japan capital spending is out on Thursday.

These are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index dipped 0.2 percent as of 9:11 a.m. London time.
• The U.K.’s FTSE 100 Index fell 0.3 percent.
• Germany’s DAX Index fell 0.3 percent.
• Futures on the S&P 500 Index gained 0.2 percent.
• The MSCI Asia Pacific Index fell 1.1 percent.
• Japan’s Topix index fell 1.2 percent, Hong Kong’s Hang Seng dropped 1.6 percent, South Korea’s Kospi declined 1.2 percent.
• Australia’s S&P/ASX 200 Index declined 0.7 percent.

Currencies

• The Bloomberg Dollar Spot Index increased 0.1 percent to the highest in almost three weeks.
• The euro decreased 0.2 percent to $1.2203, the weakest in six weeks.
• The British pound fell 0.2 percent to $1.3886, the weakest in more than two weeks.
• The Japanese yen gained 0.1 percent to 107.22 per dollar.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.90 percent.
• Germany’s 10-year yield dipped one basis point to 0.68 percent.
• Britain’s 10-year yield decreased one basis point to 1.561 percent.
• Japan’s 10-year yield rose one basis point to 0.05 percent.

Commodities

• West Texas Intermediate crude fell 0.2 percent to $62.88 a barrel.
• Gold dipped 0.1 percent to $1,317.51 an ounce, the lowest in almost three weeks.

— With assistance by Adam Haigh