A worldwide measure of stocks was little changed yesterday, while US Treasury yields touched one-month highs and the euro slipped as the prospect of higher US interest rates begins to take hold in markets.
After the European Central Bank last week adopted a more accommodative monetary policy stance, focus is shifting to the Federal Reserve’s policy meeting next week. Analysts said there could be a reassessment of the timing of the first US rate increase.
Stocks were slightly lower on Wall Street a day after the S&P 500 hit a record close for a fourth straight session and world shares hovered near their lifetime high set in November 2007.
“Most valuation metrics suggest that equities are no longer cheap, though they’re not exactly overpriced where they are now,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York. “People are looking for reasons to really buy, but we’re optimistic that equities can continue to push higher.”
The Dow Jones industrial average fell 15.59 points, or 0.09 per cent, to 16,927.51, the S&P 500 lost 3.77 points, or 0.19 per cent, to 1,947.5, and the Nasdaq Composite dropped 11.06 points, or 0.26 per cent, to 4,325.18.
The pan-European FTSEurofirst 300 index edged up 0.3 per cent to its highest close since January 2008.
MSCI’s 45-country stock gauge dipped marginally; at 426.87 points it was less than two points away from a record.
Chinese inflation data remained well within the government’s comfort zone, giving China room to eventually launch fresh stimulus measures to support the economy.
Chinese, Indonesian and Korean shares all rose more than one per cent.
The euro fell near last week’s four-month low against the US dollar at $1.3532.
The greenback drew support both from the ECB’s decision last week to cut interest rates and to start charging banks for keeping their spare cash on deposit and by fresh bets that the Fed could begin to raise rates earlier than expected.
Comments on Monday by James Bullard, president of the St Louis Federal Reserve Bank, added to the focus on the Fed.
Bullard said he could move forward his view on when interest rates should be raised.
The dollar index, which measures the dollar against a basket of key currencies, climbed 0.2 per cent, though the dollar was slightly lower against the yen, at 102.36 yen.
“If broader measures are suggesting that the US economy is on a stronger footing, the market has to bring forward the expectations of a Federal Reserve rate hike,” said Aroop Chatterjee, currency strategist at Barclays in New York.
The greenback continued to benefit from rising US Treasury yields as the benchmark 10-year rate topped 2.65 per cent for the first time since May 13 before inching back to 2.633 per cent.
Next week’s Fed policy meeting, on June 17-18, will be followed by a press conference by Fed Chair Janet Yellen, who likely will be pressed on the timing of interest rate hikes.