World stocks attempt recovery on eve of Fed
LONDON: World stocks nudged slightly higher yesterday, with gains capped by news of plunging German investor confidence and markets cautious on the eve of a US Federal Reserve decision, dealers said. Equities were still wobbly over a Facebook-led tech sell-off and ahead of a feared US interest rate hike this week, as concerns of a possible trade war sparked by President Donald Trump’s announcement on tariffs also weighed.
In Tuesday deals, the London FTSE 100 and New York Dow Jones indices recovered composure, while the Paris CAC and Frankfurt DAX saw earlier gains capped by news that German investor confidence plunged in March, reflecting fears of a transatlantic trade war.
US. stocks inched higher yesterday with energy stocks leading the way thanks to a jump in oil prices but technology stocks remained on the defensive after the previous day’s bruising selloff. Oil rose to its highest level so far this month, lifted by tension in the Middle East and the possibility of further falls in Venezuelan output.
That helped push the S&P energy index up 0.9 percent. S&P 500 technology stocks, after a fleeting advance at the opening bell, were back modestly in the red, adding to Monday’s steep losses when Facebook Inc’s data privacy issues hit the sector.
Investors are also focused on the Federal Reserve’s two-day policy meeting where it is expected to raise interest rates by a quarter percentage point. But the bigger question is how aggressive the US central bank will be with monetary policy after that. Traders currently expect two more rate hikes later this year, although they said policymakers could set a hawkish tone by forecasting four increases in their “dot plot” projections.
The past nine years of US stock market gains have come with the Fed fostering an environment of easy money for the financial system, but it has begun gradually withdrawing that accommodation as the economy appears to be on healthier footing. Few economists expect new Fed chair Jerome Powell to alter the trajectory of the bank’s anticipated rate path, but as it is his first meeting at the helm, investors have been somewhat on edge as the meeting approaches.
Aside from the Fed, the Trump administration is creating a stir with plans for up to $60 billion in new tariffs on Chinese imports by Friday, targeting technology, telecommunications and intellectual property, sources familiar with the matter told Reuters.
“There’s much more volatility in this marketplace and that’s because there two main fears - monetary policy mistake and trade policy mistake and on backdrop is a lot of chaos that comes out of White House,” said Art Hogan, chief market strategist at B. Riley FBR in Boston.
A survey of 220 analysts and investors from the ZEW institute gave a reading of 5.1 points-a slump of 12.7 points from February’s level and far below the 13.1 forecast by analysts.
The last time confidence among financial players was so low was in the months after Britain’s June 2016 vote to quit the European Union.
London stocks meanwhile added 0.3 percent following data showing a slowdown in British annual inflation in February. “Small gains in UK and European markets have not put much of a dent in yesterday’s losses,” noted IG analyst Chris Beauchamp.
“Hopes of a rebound in stocks have faded, with little enthusiasm evident this morning among buyers in the wake of yesterday’s downward turn.” News of a massive data breach at Facebook fuelled fears of a regulatory crackdown on the technology sector, sparking plunges worldwide on Monday.
The scandal at the social media giant further fuelled anxiety among investors already fretting over possible US rate rises and Trump’s protectionist rhetoric, which has sparked talk of a global trade war.
Reports said Cambridge Analytica, the analysis firm hired by Trump’s 2016 presidential campaign, stole data from 50 million Facebook user profiles to help design software to predict and influence voters’ choices. “The scandal surrounding Facebook in relation to Cambridge Analytica has dented the tech sector as a whole, and the longer the story looms, the more pressure is likely to be applied to the industry,” CMC Markets UK analyst David Madden said.
The news hammered tech giants, with Facebook plunging 6.8 percent while other household names were also hit-including Apple, Google-parent Alphabet and Netflix-by regulatory concerns.