Wall Street stocks opened lower yesterday after weak US economic data disappointed investors, further dragging on global equity prices after the approval of a fiscal stimulus package by Japan’s cabinet failed to cheer markets.
Oil rebounded strongly after having fallen as much as 10 per cent in one week, but concerns about oversupply lingered.
Japanese Prime Minister Shinzo Abe’s Cabinet approved 13.5 trillion yen in fiscal measures yesterday. The easing moves were perceived as less aggressive than anticipated and the yen rallied to a three-week high against the US dollar. Last week, the Bank of Japan announced easing steps that disappointed investors who had hoped for more.
“These governments are flailing about looking for something that will get it back on track, and certainly public confidence that they have really done enough has been something that has been difficult to achieve,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
MSCI’s world stocks index, which tracks shares in 45 nations, was down 0.75 per cent.
Wall Street added to Monday’s modest losses after data showed inflation still muted and below the US Federal Reserve’s two per cent target, despite a better-than-expected rise in consumer spending in June.
The Dow Jones industrial average fell 111.97 points, or 0.61 per cent, to 18,292.54, the S&P 500 lost 16.99 points, or 0.78 per cent, to 2,153.85 and the Nasdaq Composite dropped 53.84 points, or 1.04 per cent, to 5,130.36.
Dow component Pfizer was one of the biggest drags on the S&P 500 after revenue from its array of branded patent-protected medicines disappointed investors.
European stocks dropped to a three-week low, dragged down by banks, after Commerzbank’s shares slid to a record low after the bank warned that its earnings would fall this year.
Oil rose more than two per cent in early trading after falling by around $4 a barrel in one week. But investors remained concerned about oversupply weighing on prices, which subsequently turned lower.
Brent crude was off one per cent at $41.72 a barrel, while US crude fell 1.5 per cent to $39.48.
The US dollar dropped to a six-week low against a basket of currencies, pressured by expectations that the Federal Reserve would delay raising interest rates after the recent soft US economic data. The dollar index was down 0.64 per cent at 95.096.
In bond trading, US Treasury yields surged on the Japanese fiscal stimulus measures, dampening demand for US government debt and sending long-dated US yields to their highest levels in more than a week.
US 30-year yields rose the most among US Treasuries and hit 2.332 per cent, their highest since July 21, as prices fell more than two full points. Benchmark 10-year yields hit a six-day high of 1.573 per cent.
Spot gold prices were up by one per cent to $1,366.35 an ounce.