Global equities drop on strong US data, inflation signals

by Jonathan Adams
Global equities drop

The Dow Jones Industrial Average (DJIA) dropped 23.34 points, to 34,577.04, the S&P 500 shed 15.27 points, to 4,192.85, and the Nasdaq Composite lost 141.82 points, to 13,614.51

Global equities markets lagged on Thursday after stepping back from near-record levels earlier in the week, as investors studied strong US data reports for economic recovery and inflation signals.

US stocks wavered during the session and ended lower as investors experienced good reports about corporate tax hikes but still wary about the Federal Reserve potentially shifting monetary policy.

Analysts said the moves in major stock indexes have been muted in recent days as concerns about high valuations for many stocks following the months-long rally in US markets gives some investors pause.

The market is digesting strong economic data with some inflationary pressures and factoring in whether this will change the timing of Fed tapering and how to factor that into stock prices, said Brad Neuman, director of market strategy at Alger in New York.

Oil was little changed following two straight days of gains that took oil futures to highs not seen in a year, after weekly US crude stocks fell sharply while fuel inventories rose more than expected.

US crude recently advanced 0.07% to $68.88 per barrel and Brent was at $71.36, up 0.01% on the day.

Gold dropped more than 2% as a strengthening labour market helped propel the dollar higher.

The dollar index, which tracks the greenback versus a basket of six other currencies, gained 0.574 points or 0.64%, to 90.483 after dropping 2% in April and a further 1.6% in May.

The euro was last down 0.66%, at $1.2129, drifting away from highs scaled earlier in the week, while Europe’s broad FTSEurofirst 300 index declined 0.07% at 1,736.44.

A better-than-expected US weekly unemployment report and private payrolls numbers for May pointed to strengthening conditions in the labour market, while a measure of service sector activity increased to a record high, pointing to a robust economic rebound.

The strong data could force the Federal Reserve to pare back its crisis support sooner than expected, despite central bank officials’ reassurances to the contrary.

Yet, wary investors backed away from big bets over concerns of inflation ahead of the release on Friday of US jobs data, which should offer further clarity on whether the faster-than-expected pace of economic recovery can be sustained and what that might mean for monetary policy.

The MSCI world equity index shed 3.06 points or 0.43%, to 711.36.

The Dow Jones Industrial Average dropped 23.34 points, or 0.07%, to 34,577.04, the S&P 500 shed 15.27 points, or 0.36%, to 4,192.85, and the Nasdaq Composite lost 141.82 points, or 1.03%, to 13,614.51.



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