World stocks slipped yesterday as expectations that trade tensions will dominate this weekend’s summit of G7 countries and renewed talk of monetary tightening by major central banks weighed on risk sentiment.
The MSCI All-Country World index, which tracks shares in 47 countries, was down nearly half a percent by afternoon in Europe, although it was still on track to break a three-week streak of losses.
Fears of a trade war, expectations of more rate hikes in the United States, and the prospect that the European Central Bank will soon signal a winding-down of its massive monetary stimulus all contributed to the risk-off tone, investors said.
The US Federal Reserve is widely expected to raise interest rates next week, its second hike this year, and may hint at four rate increases in 2018 rather than the three that have been widely anticipated.
ECB policymakers meeting on June 14 will debate whether to end bond purchases later this year, the bank’s chief economist said this week. His hawkish message sent the euro to a three-week top, hit emerging markets, and spurred demand for safe-haven bonds.
Meanwhile, an unprecedented US-North Korea summit scheduled for June 12 in Singapore, with Washington seeking to pressure Pyongyang into abandoning its nuclear weapons programme, is giving investors another reason for caution.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.1 per cent after six straight sessions of gains took it to its highest since mid-March.
It was on track for a weekly gain of more than 1 per cent.
The pan-European STOXX 600 index was on track for its third weekly loss in a row, with renewed strength in the euro also weighing. It was last down 0.3 percent.
The dollar fell against the Japanese yen to 109.25, but remained well below a four-month top of 111.39 touched in May.
The euro fell over half a percent to $1.1732 after four straight sessions of gains took it to its highest since mid-May.
In commodities yesterday, copper was off a four-and-a-half-year high touched on Wednesday.
Oil prices fell as surging United States output and signs of weakening demand in China outweighed support from supply woes in Venezuela and Opec’s production cuts.
United States crude fell over half a per cent to $65.59 a barrel, while Brent dropped 0.9 per cent to $76.64.