US and European stocks declined yesterday as investors fretted about Greece and the timing of a US rate hike, while the dollar fell after a wire service report, denied by President Barack Obama, that claimed to cite remarks by him on the greenback’s strength.
The pan-European FTSEurofirst 300 index finished down 0.7 per cent as investors awaited news on the fate of Greece, while the US benchmark S&P 500 index fell 0.2 per cent as investors bet on an interest rate hike in September by the Federal Reserve after a rosy jobs report on Friday.
Greece’s bailout programme expires at the end of June and the country faces default on its debts.
“There are concerns that the Fed will be more aggressive regarding the timing of the hike and a steeper hike following the first one,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida, said.
US Treasuries yields fell yesterday with benchmark yields retreating from seven-month highs as concerns about Greece and its ability to avert default encouraged safe-haven demand for low-risk government debt.
“Greece is clearly a big issue. People are watching and waiting,” said John Herrmann, an interest rates strategist at Mitsubishi UFJ Securities USA Inc. in New York.
But Turkey’s main stock index tumbled five per cent and the lira hit a record low after the ruling AK Party failed to win a majority in parliamentary elections, leaving the country facing the prospect of weeks of political turmoil.
The dollar dropped more than half a per cent against a basket of major currencies even after Obama denied a Bloomberg report, citing an unnamed French official, that he had called the strong dollar “a problem” in conversation at the Group of Seven (G7) summit in Germany.
“Maybe he didn’t say it, but the report highlighted an undercurrent of discomfort with the level of the dollar and its negative impact on the US economy and the global economy,” John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
The dollar index was still up 2.85 per cent from May 15 even after the decline and the index has risen sixper cent in 2015. The euro gained 0.8 per cent against the dollar yesterday, after a one per cent gain in the preceding week. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.18 per cent, while Japan's Nikkei stock index ended down 0.2 per cent.
Brent crude futures fell 0.9 per cent to $62.76 a barrel, after skidding 3.6 per cent last week.