World stocks and the euro fell for a fourth day, as investors who had piled into both all year took a step back as the list of global uncertainties began to lengthen again.
They included a new low in US and North Korean relations, a jolt to the right in German politics, rising oil prices and falling tech stocks and the prospect of more guidance later from the Federal Reserve on its next moves.
Futures markets pointed to a flat start for Wall Street with the mood still nervy after Facebook suffered its biggest drop in 10 months on Monday and the cumulative decline in Apple’s stock price neared 10 per cent.
European bourses struggled too despite solid French data and a new one-month low for the euro which has been helping the bloc’s stocks in recent days.
The single currency fell back under $1.18, still feeling the effects of Sunday’s bruising German election win for Angela Merkel that had given it its worst day of the year.
The yen, which traditionally performs strongly in jittery markets, meanwhile faded, having gone as high as 111.550 to the dollar and gold also dropped back from a one-week high.
Yet again though, the bond market’s reaction to the latest escalation in tension between North Korea and the US proved short-lived. Yields on US Treasuries and German Bunds fell to a day’s low follow North Korean Foreign Minister’s Ri Yong Ho comments on Donald Trump’s tweet.
Both traded back up yesterday in what analysts say reflects a widespread belief that diplomacy will prevail.
Most other euro zone bond yields were also a touch higher.
A speech from Fed chair Janet Yellen, titled “Prospects for growth: reassessing the fundamentals”, was also coming into focus.
The dollar was climbing and investors will be parsing her words, and those of other Fed officials, for clues on whether the United States central bank will stick to plans to raise interest rates again in December.
Ms Yellen’s speech comes a day after Fed officials provided differing views on inflation, with one saying inflation weakness was fading, while another suggested he was nervous it wouldn’t.
“Investors are not fully up to speed with the risk of hawkish signals from Fed officials,” Mizuho strategist Antoine Bouvet said.
“The Fed is back in a situation where it would want to show optimism at the very least, and the market should be pricing in more hikes in the coming months and quarters than it is currently.”
Analysts said a rise in oil to a 26-month high, which bolsters inflation, and an upcoming sale of two-year German debt should also keep upward pressure on yields.
Brent crude futures dipped to $58.42 a barrel, having earlier hit $59.49, the highest since July 2015 and more than 34 per cent above the 2017 low.