Global stocks pulled back from record highs yesterday while the dollar rose ahead of minutes from the US Federal Reserve’s January policy meeting, which could offer clues about the next interest rate rise.

A stronger greenback weighed down oil, metal and other commodity prices.

US and German bond yields initially fell on safe-haven demand, stoked by jitters about the first round of the presidential election in France where polls showed anti-EU, anti-immigrant candidate Marine Le Pen leading.

They reversed after centrist candidate Francois Bayrou offered his backing to independent candidate Emmanuel Macron in a bid to bolster Mr Macron’s chances of defeating Ms Le Pen.

“This is politics, as well as markets increasingly betting on an imminent rate hike by the Fed,” said Commerzbank strategist Thu Lan Nguyen in Frankfurt.

He added: “Volatility is rising as investors start to prepare for the elections.”

MSCI’s main index of global stocks, which tracks share prices across 46 countries, hit a second successive record high at 446.60 earlier yesterday. Its gain faded with a weaker open on Wall Street and lower European mining stocks.

Volatility is rising as investors start to prepare for the elections

Relatively strong earnings seasons in Europe and the United States, strong economic data, and US President Donald Trump’s promises of tax reform, less regulation and more infrastructure spending have all helped lift stocks this year.

In late morning trading, the Dow rose 8.08 points, or 0.04 per cent, to 20,751.08, the S&P 500 lost 2.52 points, or 0.11 per cent, to 2,362.86 and the Nasdaq Composite  dropped 7.42 points, or 0.13 per cent, to 5,858.53.

The Dow, S&P 500 and Nasdaq had hit record closing highs on Tuesday.

Europe’s broad FTSEurofirst 300 index added 0.10 per cent, at 1,473.32.

Fed Chair Janet Yellen said last week it was likely the central bank would need to raise rates at an upcoming meeting. Markets have priced in only a slim chance of a rise next month but a much greater likelihood by June.

The dollar held steady against a basket of major currencies , last up 0.1 per cent at 101.42.

Concerns about sweeping changes from major elections across Europe, and the prospect of higher US rates, pushed the gap between short-dated US and German government bond yields to its widest in nearly 17 years.

German two-year yields hit a record low of minus 0.919 per cent before bouncing to minus 0.892 per cent. US two-year yield hit 1.208 percent before retracing to 1.220 per cent, Reuters data showed.

In the oil market, Brent crude  was last down 85 cents, or 1.5 per   cent, at $55.81 a barrel. US crude  was last 80 cents, or 1.47 per cent, lower at $53.53 per barrel.

Spot gold prices fell $1.84 or 0.15 per cent, to $1,234.06 an ounce.

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