The euro rose yesterday alongside sterling and bond yields as a slew of hawkish comments from central banks signalled the era of ultra-loose monetary policy is ready to sunset across the Atlantic.

The dollar index touched its lowest since October as investors shifted to the view that the US Federal Reserve might not be the only game in town when it comes to higher interest rates.

With the Fed green-lighting dividends and buybacks in major banks as part of another round of stress tests, financial stocks rose but not enough to offset declines in technology and interest-rate sensitive sectors.

The Dow Jones Industrial Average fell 141.81 points, or 0.66 per cent, to 21,312.8, the S&P 500 lost 19.3 points, or 0.79 per cent, to 2,421.39 and the Nasdaq Composite dropped 92.96 points, or 1.49 per cent, to 6,141.46.

European shares failed to hold onto early gains. The pan-European FTSEurofirst 300 index lost 1.36 per cent and MSCI’s gauge of stocks across the globe shed 0.52 per cent.

Emerging market stocks lost 0.08 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.59 per cent higher, while the Nikkei rose 0.45 per cent.

As euro zone bond yields rallied, the euro surged to as high as $1.1434. The dollar index fell 0.31 per cent, with the euro up 0.4 per cent to $1.1421.

Bank of England Governor Mark Carney surprised many this week by conceding a hike was likely to be needed as the economy came closer to running at full capacity.

That sent sterling above $1.30 yesterday for the first time in five weeks, leaving it close to its highest levels in nine months. The pound was last trading at $1.2986, up 0.48 per cent on the day.

Oil futures edged up less than one per cent after hitting a two-week high, extending a rally into a sixth straight session after a decline in weekly US crude production temporarily alleviated concerns about deepening oversupply.

US crude rose 0.51 per cent to $44.97 per barrel and Brent was last at $47.42, up 0.23 per cent on the day.