Global stocks pres­sured by banker talk

Kuwait Times - - BUSINESS -

US stocks fin­ished mostly higher Fri­day, buck­ing the trend in most global eq­uity markets as wor­ries about tight­en­ing mone­tary pol­icy pres­sured sentiment. The Dow and S&P 500 ended mod­estly higher, but the Nas­daq faded into neg­a­tive ter­ri­tory at the end of the ses­sion. London, Paris and Frankfurt all ended down, hav­ing aban­doned early at­tempts at a mod­est re­bound. Tokyo and Hong Kong also fell.

Af­ter an ex­haust­ing week dom­i­nated by in­tense spec­u­la­tion on the fu­ture of in­ter­est rates there was also much port­fo­lio-shuf­fling at the end of the quar­ter. Some bar­gain-hunt­ing propped up Wall Street stocks. “A buy-the-dip men­tal­ity has been an in­ces­sant mind­set for years now, so it is fair to say that there will be an as­sump­tion that it will come into play again,” said Brief­ing.com an­a­lyst Pa­trick O’Hare in a note pub­lished be­fore Fri­day’s ses­sion.

The euro de­clined Fri­day but held above $1.14, af­ter talk of tighter ECB rates pushed the euro to more than one-year highs this week. “The jaw­bon­ing by the heads of the Euro­pean Cen­tral Bank, the Bank of Eng­land and the Bank of Canada this week sug­gested the pe­riod of di­ver­gent mone­tary pol­icy be­tween the Fed and other ma­jor cen­tral banks around the world, a pil­lar of the dol­lar’s broad rally since 2014, may be near­ing its fi­nal chap­ter,” said Omer Esiner, an an­a­lyst at Com­mon­wealth FX. “Such a sce­nario could re­move a key source of sup­port for the dol­lar go­ing for­ward.”

Grap­pling with ral­lies

London, Paris and Frankfurt all ended down, hav­ing aban­doned early at­tempts at a mod­est re­bound. Af­ter an ex­haust­ing week dom­i­nated by in­tense spec­u­la­tion on the fu­ture of in­ter­est rates there was also much port­fo­lio-shuf­fling at the end of the quar­ter. ECB chief Mario Draghi this week hinted at a pos­si­ble end to easy mone­tary pol­icy in the eu­ro­zone in re­marks that boosted the euro, cre­ated rate hike ex­pec­ta­tions and plunged eq­uity in­vestors into un­cer­tainty, un­der­min­ing stock val­u­a­tions. A strong cur­rency hurts ex­porters, while higher in­ter­est rates raise cor­po­rate fi­nanc­ing costs.

The pound rose on sim­i­lar ex­pec­ta­tions for Bri­tish mone­tary pol­icy and bond yields rose across the con­ti­nent. “Euro­pean eq­ui­ties have turned lower in late-day ac­tion pos­si­bly due to some quar­ter-end pos­tur­ing with the markets con­tin­u­ing to grap­ple with the re­cent ral­lies in the euro and Bri­tish pound and bond yields in the re­gion,” said an­a­lysts at the Charles Sch­wab bro­ker­age. Sentiment in the Bri­tish cap­i­tal was also clouded as of­fi­cial data con­firmed the econ­omy slowed to 0.2-per­cent growth in the first quar­ter, as weak con­sumer spend­ing started to bite.

Both Frankfurt and Paris had closed down al­most two per­cent Thurs­day on con­cerns that cen­tral banks are pre­par­ing to scale back stim­u­lus mea­sures, such as record-low in­ter­est rates, in re­ac­tion to solid eco­nomic growth and high in­fla­tion. For years the green­back has ben­e­fited from a di­ver­gence be­tween the Fed­eral Re­serve’s move to higher rates — in­clud­ing hikes this year — and other re­gions. Ris­ing in­ter­est rates make cur­ren­cies more at­trac­tive be­cause they of­fer a higher rate of re­turn.

Ma­jor US in­dices won solid gains over the first half of 2017 amid im­prov­ing eco­nomic data, bet­ter earn­ings and op­ti­mism that Pres­i­dent Don­ald Trump would win pas­sage of tax cuts and other growth mea­sures. How­ever, an­a­lysts are more cau­tious about the se­cond half of the year, point­ing to the re­cent lurches in tech­nol­ogy stocks as a po­ten­tial har­bin­ger of broader volatil­ity. Other chal­lenges in­clude moves by the Fed­eral Re­serve and other global cen­tral banks to tighten mone­tary pol­icy and the fad­ing prospects of Trump’s growth agenda. Wells Fargo pre­dicted that the S&P 500 would end the year be­tween 2,230 and 2,330, down 100-200 points from cur­rent lev­els. Other damp­en­ing fac­tors in­clude lofty val­u­a­tions and wor­ries about in­fla­tion, Wells Fargo said in a note this week. —AFP

—AFP

TOKYO: A cy­clist waits for a green light in front of a stock quo­ta­tion board flash­ing the Nikkei 225 key in­dex of the Tokyo Stock Ex­change in front of a se­cu­ri­ties com­pany.

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