Wall Street was on track for its worst week since June as investors focused on when the Federal Reserve might wind down its stimulus programme, while the dollar rebounded from a seven-week low yesterday.
Signs of stabilisation in China’s economy supported European stocks, however, which closed up more than half a percentage point, and the data also pushed crude prices higher.
Comments from Fed officials this week that indicated a desire to start cutting bond purchases gave traders a reason to pull back from last week’s records.
The repositioning of trades built up around the Fed’s bond-buying program has been a factor in market moves this week, along with the lighter volume heading into the end of summer.
The uncertainty prompted investors to pull a record $3.27 billion out of US-based funds that hold Treasuries in the latest week, data from Thomson Reuters’ Lipper service showed.
The outflow from Treasury funds in the week ended August 7 was the biggest since Lipper records began in 1992.
Bond prices were lower on Friday as investors took profits on the week’s gains. The 10-year Treasury note fell 4/32 in price, to yield 2.56 per cent.
The Fed has said it will reduce its $85 billion in monthly purchases later this year if the economy progresses as expected.
Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its purchases from September if economic data keeps improving, and there was no fresh information yesterday that would help clarify the situation.
The uncertainty had driven the dollar lower this week but the currency bounced up yesterday, with the dollar index gaining 0.2 per cent.
The Dow Jones industrial average dropped 109.11 points, or 0.70 per cent, to 15,389.21. The Standard & Poor’s 500 Index fell 7.06 points, or 0.42 per cent, to 1,690.42.
The Nasdaq Composite Index gave up 10.27 points, or 0.28 per cent, at 3,658.85.
But Europe’s broad FTSE Eurofirst 300 index gained 0.6 per cent as the latest data out of China lifted stocks of mining companies higher. World shares dipped 0.1 per cent.
The run of upbeat Chinese data in the past two days has helped to ease investor concerns that a sharp slowdown in the world’s second-largest economy could derail global growth.
China said factory output rose 9.7 per cent in July, beating forecasts, and retail sales grew 13.2 per cent while inflation held steady. The data added to Thursday’s trade figures showing exports from the Chinese economy running at a surprisingly strong pace.
The promising numbers lifted Brent oil above $107 a barrel , a day after it hit the lowest levels in more than a month.
Brent was up $1.11 to $107.79, while US crude gained $2 to $105.06. (Reuters)