The dollar hit an eight-and-a-half-month high against key world currencies yesterday as the prospect of further European Central Bank stimulus dragged the euro down to its weakest since mid-April.
Global stock markets were mixed, with Wall Street dropping after a long weekend and ahead of a crucial jobs report on Friday, while European shares rose. Still, the three major US indexes were set to end the month higher for a second straight month.
“We’re coming off a quiet holiday week and we have a lot of hurdles to cross this week with all the data that we’re expecting,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
At 10.30am EST (1530 GMT), the Dow Jones industrial average fell 19.61 points, or 0.11 per cent, to 17,778.88, the S&P 500 lost 3.05 points, or 0.15 per cent, to 2,087.06 and the Nasdaq Composite dropped 5.09 points, or 0.1 per cent, to 5,122.44.
The week is likely to highlight the divergent outlooks for interest rates in the United States and the euro zone which may set the tone for markets early next year.
European shares were lifted by the prospect of the ECB unveiling an extension of its bond-buying programme at a Thursday meeting.
The pan-European FTSEurofirst 300 index was up 0.2 per cent and was set for a two per cent monthly gain.
In contrast, the US Federal Reserve is expected to raise interest rates in December for the first time in nearly a decade.
The dollar index, which measures the greenback against a basket of major currencies, touched its highest since mid-March and was on track for a three per cent monthly gain.
The euro, which dropped to its lowest since mid-April, fell 0.2 per cent against the dollar to $1.0572 and was on track for its biggest monthly drop since March.
“We are probably with the consensus, the Fed is going to tighten, the ECB is going to ease, so the euro will go lower to about 1.05 and then that will be your lot [for the year],” said Sanjiv Shah, chief investment officer with Sun Global in London.
The MSCI index of world stocks was off 0.24 per cent by late morning and was on track for a 0.8 per cent decline for November.
Earlier, shares fell in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8 per cent and was on course to drop 2.8 per cent for the month, after making its first gains in six months in October.
The Shanghai Composite ended up 0.3 per cent Monday after Chinese stocks fell more than five per cent on Friday.
Brent crude, the global benchmark for oil prices, rose one per cent, or 46 cents, to $45.32 per barrel. It remained on track for a 10 per cent fall this month.
US crude futures were up 1.3 per cent, or 53 cents, at $42.24
Gold, which is on track for its worst month since June 2013, last traded up 0.3 per cent at $1,061.87 an ounce.
Benchmark US 10-year Treasuries notes were up 3/32 in price to yield 2.214 per cent.