A gauge of global equity markets retreated from a one-year high yesterday and the dollar dipped to session lows after data on the US services sector fell short of expectations.
The Institute for Supply Management said its index of non-manufacturing activity fell to 51.4, its lowest level since February 2010, from 55.5 the month before and well shy of the 55 estimate.
Stocks on Wall Street turned negative in the wake of the data and MSCI’s index of world shares pared gains from an intraday high of 423.28, its highest level in a year.
The dollar weakened, touching a one-week low against the yen while the dollar index hit a two-week low of 95.03.
The Dow Jones industrial average fell 19.76 points, or 0.11 per cent, to 18,472.2, the S&P 500 lost 2.12 points, or 0.1 per cent, to 2,177.86 and the Nasdaq Composite added 3.81 points, or 0.07 per cent, to 5,253.71.
Stocks in Europe also pulled back after the data, with the FTSEurofirst 300 last down 0.3 per cent although MSCI’s index of world shares was 0.4 per cent higher.
The services sector report also tamped down expectations for a rate hike by the US Federal Reserve in September, with the odds of a rate hike this month now at 15 per cent versus 21 per cent on Friday, according to CME’s FedWatch tool.
Comments from several Fed officials in recent weeks had increased the probability for a rate hike this year, but expectations have declined since Friday’s weaker-than-anticipated US payrolls report.
Financials, off 0.9 per cent, which stand to benefit from an increase in rates, were the worst performer of the 10 major US sectors.
Benchmark 10-year US Treasury yields sunk to a session low of 1.549, last yielding 1.5562 per cent, up 12/32 in price.
“Treasuries quickly jumped on the ISM report. We’re seeing all buyers as the odds for a September hike have diminished,” said Justin Lederer, Treasury trader at Cantor Fitzgerald in New York.
The disappointing data helped lift spot gold more than one per cent to $1,340.31 an ounce, after touching a high $1,342.14 an ounce, its highest level since August 23.
But despite the weaker dollar and low expectations for a rate hike this month, oil prices were lower, with Brent off 1.9 per cent at $46.71 and US crude down 0.4 per cent to $44.26 as hopes for quick action by producers to tackle a global supply glut faded.
Oil prices had jumped earlier after Saudi Arabia and Russia agreed on Monday to cooperate in world oil markets, saying they will not act immediately but could limit output in the future.