US Treasury yields and the dollar dropped to seven-month lows yesterday and world stocks slid as political uncertainty from the United States to the Middle East and weakness in commodity markets pushed investors away from risky assets.
The yen and gold also gained amid prevailing caution as an Arab rift opened up around Qatar, and ahead of testimony from the former head of the FBI, a British election and the European Central Bank’s next move, which all happen tomorrow. Wall Street was lower for a second day after both European and Asian stocks dropped during their sessions.
The Dow Jones Industrial Average fell 31.09 points, or 0.15 per cent, to 21,152.95, the S&P 500 lost five points, or 0.21 per cent, to 2,431.1 and the Nasdaq Composite dropped 6.70 points, or 0.11 per cent, to 6,288.98.
On what BayernLB analysts called “Super Thursday”, British voters will also go to polls in an increasingly unpredictable general election, the European Central Bank is due to meet and later the same day and former FBI director James Comey will testify before Congress.
The diplomatic spat in the Middle East left oil prices hovering just below $50 a barrel and this, in turn, hit European stocks, which tumbled across the board.
The pan-European FTSEurofirst 300 index lost 0.66 per cent and MSCI’s gauge of stocks across the globe shed 0.25 per cent.
The broad Euro STOXX 600 was down 0.7 per cent while German stocks were down 1.05 per cent.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.2 per cent lower, while Japan’s Nikkei lost 0.95 per cent.
US crude fell 0.38 per cent to $47.22 per barrel and Brent was last at $49.19, down 0.57 per cent on the day.
Investors instead bought gold, US Treasuries and German government bonds – some of the safest assets in the world – thrusting gold prices to seven-week highs and German 10-year borrowing costs to six-week lows.
US Treasury yields dropped to a seven-month low of 2.129 per cent at one stage. It is a move that has come despite the Federal Reserve widely expected to raise US interest rates next week, but also follows a run of weaker-than-expected US data.
Erlam of OANDA said another area for concern is how steady sterling has been – about flat against both the dollar and the euro – potentially a sign of complacency before the election.
The lead of British Prime Minister Theresa May over the opposition Labour Party ahead of the general election has narrowed to just one percentage point, according to a poll conducted before the attacks in London on Saturday.
Other polls in recent days have found bigger leads for the Conservatives of up to 11 and 12 points.