US Treasuries yields rose and the dollar climbed to one-week highs yesterday after a gauge of US consumer spending rose at its fastest pace in seven months.
Wall Street stocks slipped, while European shares rose to two-month highs after data pointed to an improving economic outlook across the euro region, though the optimism failed to carry over to Wall Street. World equities markets were little changed.
The benchmark 10-year US Treasury note was down 24/32, its yield at 2.7063 per cent.
Strong US data will encourage the Federal Reserve to trim its monthly purchases of about $85 billion in bonds, perhaps as early as September.
Such a move will boost US bond yields and bolster the appeal of dollar-denominated assets.
“For the next five-and-a-half weeks, every US statistic will be measured by its impact on the September 18 (Federal Open Market Committee) decision,” said Joseph Trevisani, chief market strategist at WorldWideMarkets, in Woodcliff Lake, New Jersey. “By that standard today’s number should keep the Fed on track to curtail quantitative easing purchases in September.”
MSCI’s all-country world index, a measure of 45 equity markets around the world, edged up 0.1 per cent.
The Dow Jones industrial average dropped 24.27 points, or 0.16 per cent, at 15,395.41. The Standard & Poor’s 500 Index was down 1.12 points, or 0.07 per cent, at 1,688.35. The Nasdaq Composite Index was down 3.62 points, or 0.10 per cent, at 3,666.33. Consumer stocks, especially homebuilders, dragged on Wall Street.
The group came under pressure as government bond rates rose, making mortgages less affordable. PulteGroup Inc was the biggest loser among consumer discretionary stocks, trading 2.6 per cent lower at $15.30.
“The general tone in markets is positive, but things are feeling a bit heavy,” said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, who helps oversee $118 billion. “I think the next five per cent move in markets will be down, while the next 10 per cent move after that will be up.”
Europe’s broad FTSEurofirst 300 index hit its highest level since May before pulling back to 1,236.50, up 0.5 per cent on the day.
The dollar index, which measures the greenback versus a basket of six currencies, gained 0.6 per cent to 81.804.
The euro fell 0.4 per cent to $1.3244, while the dollar rallied 1.1 per cent to 97.98 yen.
In Asia, Japanese shares jumped 2.6 per cent and the yen fell after a media report that Prime Minister Shinzo Abe is considering a cut in corporate taxes to counter the pain of a planned sales tax increase.
Brent crude oil rose towards $110 per barrel after oil exports from Libya fell to their lowest in two years, heightening supply worries ahead of scheduled cuts in output from fellow OPEC member Iraq.
Brent crude oil futures for September were up 57 cents to $109.54 per barrel, while US light crude oil slipped 14 cents at $105.97.