World equities heading for biggest fall in weeks on Fed’s comments

On Thursday equities around the world were moving towards their biggest fall in weeks after the U.S. Federal Reserve surprised investors by indicating it might raise interest rates at a much faster pace than thought, sending bond yields and the dollar sharply higher.

The dollar added to what was the strongest one-day increase in 15 months after the Fed meeting, while Europe’s government borrowing costs moved higher after 10-year U.S. Treasury yields rose by their most since the beginning of March.

Europe’s STOXX 600 cut short a nine-day winning streak - its longest since 2017 - with a 0.3% early drop. Asia-Pacific shares were closing down around 0.7%, while Wall Street futures pointed to a modest 0.5% drop.

The Fed also indicated it would now be considering whether to reduce its $120 billion-a-month asset purchase programme meeting by meeting and lowered the risk from the pandemic given progress with vaccinations.

Mining stocks dropped 1% as the U.S. central bank’s comments boosted the dollar and hit commodity prices. Utility and technology shares were also among the biggest decliners in morning trading.

The Fed’s tone on tightening its pandemic-era policy was also notably different from the European Central Bank’s position last week, when it said it was too early to debate closing the money taps despite a recent increase in inflation.

Late on Wednesday, in company news, German biotech CureVac NV said its COVID-19 vaccine missed the main goal in a late-stage trial, raising doubts about the potential delivery of hundreds of millions of doses to the European Union. The company’s shares lost 44.3% and were on course for their worst session since their August 2020 U.S. IPO.

Oil prices were shielded by the prospect of stronger world demand and still tight supply, with Brent reaching its highest since April 2019 before running into profit taking and headwinds from the sharply higher dollar. Brent was last off 0.3% at $74.15 a barrel, while U.S. crude lost 0.2% as well to trade at $71.98.

This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.