World stock markets lost ground yesterday, pressured by a sharp drop in oil prices to their lowest in more than a year, while the US dollar strengthened on hawkish comments from US Fed officials.
Brent crude touched its lowest level since April 2016 and WTI hit its lowest since February 2016 following news of increases in supply by several key producers.
That slide weighed down energy stocks on Wall Street and in Europe. The S&P energy index dropped 1.9 per cent as the worst performing of the 11 major S&P sectors and Europe’s oil and gas sector slumped 2.1 per cent.
“What is amazing about this market is that we have been able to make new all-time highs with energy basically back to what it was doing in 2014 and 2015,” said Marc Chaikin, chief executive of Chaikin Analytics in Philadelphia.
The Dow and benchmark S&P 500 had hit fresh records on Monday, buoyed by a rebound in the tech sector.
Chaikin sees the 2,450 level on the S&P 500 as a strong resistance point the market is having difficulty climbing over, “given that earnings season is over and we are just sort of wavering between various stimuli.”
The Dow Jones Industrial Average fell 2.1 points, or 0.01 per cent, to 21,526.89, the S&P 500 lost 7.26 points, or 0.30 per cent, to 2,446.2 and the Nasdaq Composite dropped 13.97 points, or 0.22 per cent, to 6,225.05.
The pan-European FTSEurofirst 300 index lost 0.43 per cent and MSCI’s gauge of stocks across the globe shed 0.44 per cent.
US crude fell 2.99 per cent to $42.88 per barrel and Brent was last at $45.67, down 2.64 per cent.
The US dollar strengthened for a second day as Federal Reserve officials maintained a hawkish tone on hiking interest rates.
On Monday, New York Fed President William Dudley said halting the rate-hiking cycle now would imperil the economy. That was followed by Boston Fed President Eric Rosengren, who said yesterday the era of low interest rates in the United States and elsewhere poses financial stability risks.
The dollar index, tracking the unit against other key world currencies, rose 0.31 per cent, with the euro down 0.22 per cent to $1.1124. The greenback is up nearly one per cent for the month.
Sterling was last trading at $1.261, down 0.96 per cent on the day. Bank of England Governor Mark Carney doused speculation that he might soon back higher interest rates, telling bankers yesterday that he first wanted to see how the economy coped with Brexit talks in coming months.
Benchmark 10-year notes last rose 6/32 in price to yield 2.1687 per cent, from 2.188 per cent late on Monday.