Global equity markets and government debt prices fell yesterday as investors speculated on how soon the Federal Reserve may begin reducing its stimulus, a key support to the economy and stocks.
German Bunds hit three-week lows, tracking weaker prices for US Treasuries, as investors made room for this week’s latest supply of US govern-ment debt.
A measure of global equity performance was down slightly as stocks on Wall Street and in Europe fell, a day after the Dow Jones industrial average hit yet another record close.
With little economic data, investors will search for clues about potential Fed tapering in remarks by Minneapolis Fed President Narayana Kocherlakota and Atlanta Fed President Dennis Lockhart, who are due to speak in the afternoon.
Dallas Fed President Richard Fisher said in an interview with CNBC cable television that the Fed’s monetary stimulus program cannot continue forever.
“There are not as many stocks participating on the upside as there are for the downside,” said Frank Gretz, market analyst and technician for brokerage Shields & Co. in New York.
“The net of this is that the market has more to go on the downside on the short-term, although there isn’t a big problem, a big divergence in the market,” he said.
MSCI’s all-country world equity index fell 0.2 per cent after two days of gains, while the pan-European FTSEurofirst 300 index of leading regional shares fell 0.57 per cent.
The Dow Jones industrial average fell 53.81 points or 0.34 per cent, to 15,729.29, the S&P 500 lost 5.45 points or 0.31 per cent, to 1,766.44 and the Nasdaq Composite dropped 9.914 points or 0.25 per cent, to 3,909.875. US Treasury prices fell, with the benchmark 10-year US Treasury note down 8/32 in price to yield 2.7738 per cent.
The dollar rose to a one-month peak against the yen as investors began to bet the Fed will begin trimming stimulus sooner than previously anticipated.
The dollar was last up 0.47 per cent at 99.62 yen, with the peak of 99.79 yen its strongest since September 13. The euro was up 0.18 per cent at $1.3430 and holding above a two-month low of $1.3295 hit last Thursday, when it sold off sharply after the ECB’s unexpected rate cut.