World stock markets recovered yesterday from initial losses after Moody’s first credit downgrade of China in 30 years, with investors turning their attention to US Federal Reserve minutes that could provide more certainty of a rate hike next month.
Meanwhile Asia stocks and emerging markets initially skidded after Moody’s Investors Service’s downgraded China, cutting its sovereign debt to A1 from Aa3.
However, dented markets mostly recovered. Japan’s Nikkei rose 0.66 per cent and emerging market stocks rose 0.05 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.05 per cent lower.
Markets were lacking fresh economic or corporate drivers.
Investors shrugged off the rise in Britain’s terror threat level to maximum following Monday’s attack in Manchester.
European shares fall and oil prices dip while gold increases
The Dow Jones Industrial Average rose 20.59 points, or 0.1 per cent, to 20,958.5, the S&P 500 gained 1.15 points, or 0.05 per cent, to 2,399.57 and the Nasdaq Composite added 7.18 points, or 0.12 per cent, to 6,145.89. The US dollar hovered just above its 6-/12 month lows as investors shifted from US politics to monetary policy ahead of the release of the minutes from the Fed’s May meeting.
Measured against a basket of other major currencies, the dollar index rose 0.03 per cent.
“The dollar has taken quite a beating over the last month,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
“You are seeing a little bit of calming down this morning as there is very little economic or headline news to really sway the market one way or other.”
Interest rate futures implied traders see about an 80-per cent chance of a quarter-point rate hike at the Fed’s June meeting.
“Our US economists expect the minutes to come down on the hawkish side and continue to expect the Fed to hike in June and September and announce balance sheet reduction in December,” Citi analysts wrote on Wednesday.
While recent economic data has been mixed, with signs of a dip in consumer sentiment and spending, the job market continues to strengthen. That could give the Fed impetus to continue with its path of monetary tightening.
Oil prices reacted well, with US crude down 0.29 per cent to $51.32 per barrel and Brent last at $54.00, 0.28 per cent lower on the day.
The pan-European FTSEurofirst 300 index lost 0.06 per cent and MSCI’s gauge of stocks across the globe shed 0.08 per cent.
The euro was 0.03 per cent lower at $1.1179.Spot gold added 0.2 per cent to $1,252.75 an ounce.