World stocks, the dollar and oil all fell modestly yesterday as investors locked in recent gains before central bank meetings in the United States and Japan this week.
European and Asian equities both sank as 3.2 and 1.2 per cent falls for miners and oil firms pushed the FTSEurofirst 300 down for a third straight day and Tokyo gave back a fifth of the four per cent it made last week.
Wall Street looked set for a subdued start too with another flurry of company earnings from, among others, Halliburton and Xerox about to hit after some disappointing showings last week.
Signs that a three-month rally in stocks and commodities markets was cooling, a US Federal Reserve rate decision tomorrow and a Bank of Japan policy update on Thursday meant there was little incentive for traders to be bold.
Talk has been that Japan could push deeper into negative interest rate territory, while there is intense interest on where the Fed currently stands on another rate hike.
The dollar index was trading 0.3 per cent lower on the day at 94.862. Against the euro, it dipped to $1.1256, at the weaker end of a 10-cent range it has held for a year, while the yen rose to 111.16 after a walloping at the end of last week.
Sterling, meanwhile, had hit its highest in over a month after a UK media blitz from President Barack Obama calling for Britain to stay in the European Union saw bookmakers lengthen the odds on a Brexit vote in June.
The subdued start to the week for Europe’s markets was further compounded by an unexpected dip in German business morale amid simmering global growth concerns.
The Munich-based Ifo economic institute said its business climate index, which surveys around 7,000 firms, edged down to 106.6 in April compared to a forecast of a rise to 107.0. That was still well above the survey’s long-term average, but also its fourth fall in five months.
The jittery mood sent investors back into government bonds, having largely shunned them for the last couple of weeks.
Bund yields fell a fraction but remained above 0.2 per cent having ended Friday with their biggest weekly rise since last December. US Treasury yields also squeezed lower in European trade.
In Asia overnight, Chinese shares had continued a recent poor run as the blue-chip CSI300 index and Shanghai Composite Index slipped 0.5 and 0.6 per cent respectively.
Japan’s Nikkei ended down 0.8 per cent as the yen pulled off its lows. MSCI’s benchmark 23-country emerging market index dropped roughly the same in its second consecutive session of falls.
Japan’s central bank on Thursday is likely to cut its price forecasts and debate whether a strong yen, weak global demand and soft consumption have hurt inflation expectations enough to warrant another hit of stimulus.
Among commodities, oil prices slipped after notching their third straight week of gains following a pick-up up in market sentiment and signs a persistent global supply glut may be easing.
Brent fell roughly one per cent to $44.65 a barrel, while US crude shed 1.2 per cent to $43.20.