US and European shares fell yesterday after a drop in oil prices weighed on energy stocks, while two-year US Treasury yields were on track for their biggest monthly increase since December on growing expectations for a Federal Reserve rate hike.
Oil prices tumbled to more than two-week lows, with US crude falling more than three per cent, after government data showed a large surprise weekly build in US crude and distillate stockpiles and a smaller-than-expected draw in gasoline.
The losses in oil prices fuelled losses in the S&P energy index, which was last down 1.7 per cent, and the European STOXX 600 Oil and Gas sector, which was off 1.4 per cent.
Investors remained focused, however, on the upcoming US non-farm payrolls data tomorrow, which could provide clues on the timing of the next interest rate hike from the Federal Reserve. Boston Fed president Eric Rosengren said yesterday the Fed was nearing its employment and inflation rate goals, adding that rate hikes could shield the economy.
Data showing the US private sector added 177,000 jobs in August, compared with expectations of 175,000, boosted investors’ optimism about Friday’s jobs report. Analysts have noted low trading volumes in recent days, partly on anticipation of the jobs data.
“Today will be very quiet,” said John Brady, senior vice president at R.J. O’Brien & Associates in Chicago. “It’s late August and most risk managers aren’t going to allow traders to comes in with large positions.”
US two-year Treasury yields , which are more susceptible to expectations about the timing of the Fed rate increases, were set to post an increase of more than 12 basis points for August.
That monthly rise was set to be the biggest increase since last December, when the Fed hiked rates for the first time in nearly a decade. A chorus of Fed officials saying that rate hikes look appropriate before year-end has increased expectations for short-term rates to rise.
MSCI’s all-country world equity index was last down 1.45 points, or 0.35 per cent, at 416.32.
The Dow Jones industrial average was last down 59.76 points, or 0.32 per cent, at 18,394.54. The S&P 500 was down 8.29 points, or 0.38 per cent, at 2,167.83. The Nasdaq Composite was down 18.31 points, or 0.35 per cent, at 5,204.68.
Europe’s broad FTSEurofirst 300 index was last down 0.25 per cent at 1,353.75.
Brent crude was last down $1.20, or 2.48 per cent, at $47.17 a barrel. US crude was last down $1.40, or 3.02 per cent, at $44.95 per barrel.