World equity markets edged off record highs and the US dollar retreated yesterday after two days of gains as cautious investors held back amid mounting expectations for a US interest rate hike in March.
US Treasury yields were flat after a week of hawkish comments from several Federal Reserve officials and ahead of two Fed officials’ appearances that may provide clues on the direction of monetary policy. The implied probability of a March rate hike has surged to 74 per cent, from just 30 per cent at the start of the week.
US stocks were down amid investor caution ahead of speeches by Fed Chair Janet Yellen and Vice Chair Stanley Fischer.
With indexes bolstered this week by increased bets on a rate hike soon, any divergence from Yellen would raise questions, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
“There’s a certain caution in advance of her speaking. I would not be surprised with the market reacting with more vigor subsequent to her speaking,” said Luschini.
At 10:53 a.m. ET, the Dow Jones Industrial Average was down 20.58 points, or 0.1 per cent, at 20,982.39, the S&P 500 lost 3.26 points, or 0.14 per cent, to 2,378.66 and the Nasdaq Composite dipped 7.67 points, or 0.13 per cent, to 5,853.55.
Europe’s benchmark STOXX 600 fell 0.1 per cent but was also on track to end the week higher.
The MSCI global stock index was down 0.2 per cent. Benchmark US 10-year Treasury yields were flat in early North American trading after hitting a two week high earlier on Friday, ahead of the Fed officials’ appearances.
Benchmark 10-year US10YT= RR notes were little changed in price to yield 2.489 per cent.
Yields touched 2.507 per cent during European trading, the highest since February 15.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, eased about 0.3 per cent but was poised for its fourth straight weekly gain.
The euro rose 0.4 per cent to $1.0566 and France’s bluechip CAC 40 index rose 0.6 per cent, as far-right candidate Marine Le Pen’s chances in the country’s presidential election dimmed.
“We saw a peak of panic in February when the focus was on Le Pen,” said DZ Bank strategist Christian Lenk.
“It’s always been clear that the odds of Le Pen becoming the next president were low and now we see confirmation of that in polls.”
Oil prices rose as the dollar fell, though gains were held in check by unchanged Russian output for February, a sign of its weak compliance on a global deal to cut supplies.
Benchmark Brent crude futures were up 0.7 per cent at $55.46 a barrel after closing down 2.3 per cent in the previous session. WTI futures gained 16 cents, or 0.7 per cent, to $53.