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Stocks

Global stocks decline as tighter monetary policy in US and Britain pushes dollar higher

PUBLISHED : Friday, 16 June, 2017, 7:56am
UPDATED : Friday, 16 June, 2017, 8:01am

Stock indexes around the world fell on Thursday as technology shares resumed their recent sell-off, while the prospect of tighter monetary policy in the United States and Britain pushed up the dollar.

Energy stocks also fell as high global inventories pressured oil prices.

Investors have been selling tech shares, which have led market gains this year. The S&P 500 technology index ended down 0.5 per cent, but well off its lows for the day.

The tech index was pulled down by heavyweights, including Apple and Alphabet after bearish research comments. The S&P energy index lost 0.7 per cent.

“The fundamentals in general still look favourable for tech. What we’ve seen, though, are some downgrades that are based on the fact that some ran up too quickly... and it has engendered a lot of fire sales in the tech industry,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

The Dow Jones Industrial Average fell 14.66 points, or 0.07 per cent, to 21,359.9, the S&P 500 lost 5.46 points, or 0.22 per cent, to 2,432.46 and the Nasdaq Composite dropped 29.39 points, or 0.47 per cent, to 6,165.50.

The pan-European FTSEurofirst 300 index ended down 0.3 per cent and MSCI’s gauge of stocks across the globe fell 0.8 per cent.

Wednesday’s interest rate hike by the US Federal Reserve, along with its signal that another hike could follow this year, also weighed on stocks.

Federal Reserve, as expected, raises US interest rates by 25 bp

While the hike was widely expected, some investors said the central bank’s tone was more hawkish and that raised concern about the pace of US economic growth.

“Monetary policy got hawkish,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio.

In a sign that the squeeze on consumers may get tighter before long, three Bank of England policymakers voted to raise rates, against five who preferred keeping rates on hold. Economists poll had expected a 7-1 vote in favour of no change.

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The dollar rose to its highest in more than two weeks as solid readings on the US economy helped strengthen the case for the Fed to continue tightening.

The number of Americans filing unemployment claims fell more than expected last week, suggesting slack in the labour market was shrinking, and the Philadelphia Fed business conditions survey for June beat expectations after a strong reading in May.

The reports followed weak US inflation data on Wednesday.

The dollar index, which tracks the US currency against six major peers, was last up 0.6 per cent, and rose as high as 97.557, its highest since May 30.

The stronger-than-expected US economic data also boosted most US Treasury yields, while traders weighed the hawkish Federal Reserve and Bank of England signals.

Benchmark 10-year Treasury yields were last at 2.160 per cent, up from 2.138 per cent late Wednesday.

On Wednesday, benchmark yields hit 2.103 per cent, their lowest since November 10. The surprisingly weak inflation and other data overshadowed the Fed’s rate hike.

Brent crude settled down 8 cents at US$46.92 a barrel, while US crude settled down 27 cents at US$44.46, after touching a six-month low of US$44.32 a barrel.

The stronger dollar weighed on gold, which hit a three-week low. Spot gold fell 0.5 per cent to US$1,254.05 an ounce.

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