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Stocks lower, dollar firms before central bank deluge

  • <a href=”http://tmsnrt.rs/2yaDPgn”>Graphic: Global asset performance</a>
  • <a href=”http://tmsnrt.rs/2egbfVh”>Graphic: World FX rates</a>
  • Wall Street opens lower; Fed meeting eyed
  • Fed, ECB, BoE, BOJ among host of central bank meetings
  • Dollar stands tall in blockbuster week for central banks

NEW YORK, Dec 13 (Reuters) – Global stock markets edged lower and the dollar firmed on Monday as markets awaited news from a host of central bank meetings this week that could include the U.S. Federal Reserve flagging an end to its bond-buying stimulus.

Just after 11 a.m. ET/1600 GMT, The Dow Jones Industrial Average (.DJI) fell 292.04 points, or 0.81%, to 35,678.95, the S&P 500 (.SPX) lost 28.97 points, or 0.61%, to 4,683.05 and the Nasdaq Composite (.IXIC) dropped 110.78 points, or 0.71%, to 15,519.82.

The pan-European STOXX 600 index (.STOXX) lost 0.25% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.62%.

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Omicron remains a concern, with British Prime Minister Boris Johnson warning of a “tidal wave” of new cases of the coronavirus variant, weighing on the FTSE index (.FTSE) and sterling . read more

Still, with markets counting on vaccines to limit the economic fallout, the dollar was broadly firm ahead of Tuesday’s two-day Federal Reserve meeting.

The U.S. central bank is expected to signal a faster tapering of asset buying, and thus an earlier start to interest rate hikes. It will also update the outlook for rates over the next couple of years.

The dollar edged higher ahead of the upcoming meetings, with investors eyeing how quickly the Fed will unwind bond-buying and looking for clues on when it will start to raise rates in 2022.

“Nearly everyone expects the pace of tapering to accelerate and to finish at the end of (the first quarter next year),” analysts from BannockBurn wrote in a note to investors.

The European Central Bank, the Bank of England and the Bank of Japan are also meeting this week. All are heading toward normalizing policy at their own, often glacial, pace.

“If the Fed increases the taper from $15 billion to something like $30 billion they could be finished by March, which would allow them to look to hike rates after that,” said April LaRusse, head of fixed income investment specialists at Insight Investment.

China’s blue-chip CSI300 index (.CSI300) closed up 0.6%, having earlier risen to its highest in almost five months on hopes for more stimulus as the country’s top leaders vowed to prioritize economic stability in 2022. read more

Turkey’s lira was the day’s stand-out loser, crashing as much as 7% to a record low as the prospect of another interest rate cut this week loomed.

Emerging market stocks lost 0.56%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.51% lower, while Japan’s Nikkei (.N225) rose 0.71%.

The U.S. Treasury market has taken the risk of earlier Fed hikes with equanimity, perhaps looking ahead to lower inflation over the long run and a lower peak for the cash rate.

At 1.48%, 10-year Treasury yields remain well below this year’s peak of 1.776%.

U.S. and European bond yields were lower on Monday , .

The ECB, meeting on Thursday, is likely to confirm that its 1.85 trillion euro ($2.09 trillion) pandemic emergency stimulus scheme will end next March. read more

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Expectations for a rate hike at Thursday’s Bank of England meeting have been pulled back as Omicron raises concern about the near-term economic outlook.

FIRM DOLLAR

The dollar index was around 0.25% firmer at 96.329 . The greenback gained a fifth of a percent to 113.63 yen , while the euro slipped 0.25% to $1.1283 .

Britain’s pound managed to claw back some ground after falling on the government’s latest Omicron warnings. Prime Minister Boris Johnson said the first patient in the United Kingdom had died after contracting the Omicron variant.

Sterling was last trading at $1.3247, down 0.17% on the day.

U.S. crude recently fell 0.61% to $71.23 per barrel and Brent was at $74.67, down 0.64% on the day.

Turkey’s lira fell to a record low near 15 to the dollar , gripped by worries over President Tayyip Erdogan’s risky new economic policy and prospects of another rate cut at Thursday’s central bank meeting. read more

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Lira timeline December 2021

Reporting by Dhara Ranasinghe and Elizabeth Dilts Marshall; Editing by Dan Grebler

Our Standards: The Thomson Reuters Trust Principles.

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