Global equity markets slipped yesterday as the dollar moved higher and US Treasury yields rose on hawkish commentary from several Federal Reserve officials.
Richmond Fed President Jeffrey Lacker said US inflation was likely to accelerate in the coming years and move towards the Federal Reserve’s two per cent target, while San Francisco Fed President John Williams told Market News International he would advocate for another interest rate hike as early as the April meeting.
In addition, Atlanta Fed President Dennis Lockhart said the US may be in line for a rate hike as soon as April, as last week’s decision by the Fed to hold rates steady was more about ensuring that recent global financial volatility had settled down.
“The Fed does a pretty good job of giving us too much information and sometimes that confuses a lot of people,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, noting investors should focus more on the central bank’s official statement than those of individual members.
“You hear hawkish commentary from Lockhart and that is going to move things around a little bit.”
The dollar rose 0.28 per cent to 95.352 against a basket of major currencies. The greenback had fallen in the three prior weeks, a decline of 3.1 per cent.
The currency fell last week when Fed policymakers revised down the number of times they expect to raise interest rates this year to two from four. Benchmark 10-year notes were last down 11/32 in price to yield 1.9102 per cent, from 1.87 per cent on Friday.
The stronger dollar weighed on European equities, with the pan-European FTSEurofirst stock index closing down 0.25 per cent to start a week shortened by the Easter break.
US stocks were little changed as investors looked for fresh catalysts after a five-week rally that pushed the benchmark S&P 500 into positive territory for the year.
The Dow Jones industrial average rose 35.99 points, or 0.2 per cent, to 17,638.29, the S&P 500 gained 2.19 points, or 0.11 per cent, to 2,051.77 and the Nasdaq Composite added 12.04 points, or 0.25 per cent, to 4,807.68.
MSCI’s index of world shares shed 0.11 per cent.
Crude oil prices rose, with Brent last up 0.39 per cent to $41.36 and WTI up 1.57 per cent at $40.06 a barrel, as data showed a drawdown at the Cushing, Oklahoma delivery hub for US crude. Gains were curbed, however, by concerns US oil drillers could ramp up output after a two-month rally in crude.
Gold fell 0.89 per cent to $1,243.31 an ounce as the dollar advanced, its third straight decline, but the metal was underpinned by expectations that the ultra-low interest rate environment would persist on a global level.
Copper climbed 0.53 per cent to $5,068.50 a tonne on expectations of stronger demand in top consumer China after a jump in imports of refined copper by the world’s second-largest economy.
Sterling fell 0.59 per cent to $1.4392 as worries mounted over Prime Minister David Cameron’s ability to keep his Conservative party together and keep Britain in the European Union after Iain Duncan Smith, a leading voice for the UK to exit the EU, resigned from the cabinet late on Friday.