A buoyant yen and oil prices at their lowest in three months kept stock markets on the defensive yesterday as investors awaited central bank meetings this week that will unveil new stimulus in Japan and may provide clues on US interest rates.
US equity markets fell while stocks in Europe traded slightly above break-even as gains in major healthcare and consumer goods stocks propped up European equities to offset persistent concerns over the region’s banking system.
The yen hit two-week highs against the euro and more than one-week highs against the dollar as traders dialled back expectations of how much new stimulus authorities will inject into Japan’s ailing economy at the end of the week.
Most economists surveyed by Reuters expect the Bank of Japan to expand its asset purchases and cut rates further below zero at a two-day meeting that ends on Friday.
The yen gained 1.09 per cent against the dollar to 104.61. The euro fell 1.37 per cent to 114.91 yen.
MSCI’s all-country world stock index traded near break-even, while the pan-European FTSEurofirst 300 index rose 0.2 per cent to close at a provisional 1,348.04.
The Dow Jones industrial average fell 73.66 points, or 0.4 per cent, to 18,419.4.
The S&P 500 slid 4.59 points, or 0.21 per cent, to 2,163.89 and the Nasdaq Composite lost 2.48 points, or 0.05 per cent, to 5,095.15.
The US Federal Reserve is expected to leave interest rates unchanged when it concludes its two-day meeting today.
Investors are looking for any signs that the US central bank might be more likely to hike rates in coming months.
Data showed US consumer onfidence holding steady in July while new single-family home sales hit their highest level in nearly eight-and-a-half years in June, suggesting sustained momentum in the economy.
Other data showed moderate gains in house prices in May, which should support consumer spending and keep home purchasing affordable, especially for first-time buyers who have started venturing into the housing market.
The US central bank is widely expected to leave its target on policy rates at 0.25 per cent to 0.50 per cent this week due to g lobal risks, but traders seemed wary of signals the Fed would consider raising rates by year-end on signs the economic expansion remains on track.
US Treasury yields rose, reversing an early decline on European government debt, with yields stuck in negative territory due to purchases by the European Central Bank.
The benchmark 10-year Treasury yield was up one basis point at 1.5748 per cent.
US crude was down 12 cents at $43.01 a barrel. Brent rose 12 cents to $44.84 a barrel.