Global Shares Fell As Fed Disappoints
Global stocks swung to a loss after a mostly mild day of trading after the Federal Reserve said it would keep monetary policy unchanged and hinted at no additional easing, despite previous false positive sentiment.
The FTSE All-World index dropped 0.2 per cent as the Fed’s statement provided little relief to investors concerned about the health of the global economy.
On Wall Street, disappointed investors sold equities in late afternoon trading as the benchmark S&P 500 went down 0.29 per cent at the close.
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, said: “The Fed did sound a more downbeat tone on the economic backdrop and maintained that it stands ready to act if conditions warrant.
“However, this policy statement made no explicit indication that any new policy measures to support the economy are imminent.”
The Fed’s statement washed away early gains following on the S&P 500, which had already weathered fresh manufacturing data that showed the US contracted for a second straight month in July.
The FTSE Eurofirst 300 gained 0.5 per cent earlier in the day. The Asia-Pacific region lost 0.2 per cent – mostly reflecting a 0.6 per cent dip in Tokyo – in response to some soft Chinese manufacturing data.
Asia’s Soft Economic Data Not Helping
China’s official manufacturing purchasing managers’ index fell from 50.2 in June to 50.1 in July. This was an eight-month low, weaker than forecast, and is the latest in a line of meek macroeconomic data from some of the world’s biggest economies.
South Korea’s Kospi index dipped 0.1 per cent after the country’s exports dropped 8.8 per cent year-on-year in July and factory output shrank at its fastest pace in 2012 as demand from China and Europe cooled.
UK manufacturing data also came in weaker than feared.
Currencies were lacking conviction for much of the day, with the dollar index and the euro barely changed.
But after the Fed’s policy meeting, the Euro slipped 0.6 per cent to $1.222451 and the dollar index rose 0.6 per cent.
Worries about softer global demand left metals friendless, forcing copper down 1.3 per cent to $3.36 a pound.
Oil was firmer, though, with Brent crude adding $1.04 to $105.96 a barrel. Meanwhile, the theme of central bank intervention remained the prime focus of investors.
The European Central Bank was set to meet today as many growth-sensitive assets having rallied in recent sessions on hopes that the two monetary guardians might deliver further stimuli or support.
In particular, there have expectations that the ECB could take action to further reduce eurozone sovereign debt tensions.
Spanish two-year borrowing costs fell from more than 7 per cent last week and continued to move lower yesterday, falling 26 basis points to 4.8 per cent, though some were cautious.
“We think there is plenty of scope for disappointment. We doubt the Fed is ready to sanction a third round of large-scale asset purchases, while the European Central Bank’s bark could prove louder than its bite,” said John Higgins at Capital Economics.
Gold, which tends to rally on news of Fed monetary boosts, was down $16 to $1,600 an ounce.
The attraction of perceived haven assets also seemed to diminish as some expectations of central bank action were reduced. Benchmark German Bund yields were up 8 basis points to 1.37 per cent. Yields on ten-year US Treasuries added 5bp to 1.52 per cent.
Agricultural commodities, which have soared after the worst US drought since the 1950s, experienced some relief. Soyabeans fell 3.1 per cent.
Try our automated Forex trading today and begin getting in control of the market with a team of Forex experts at your back!
4th August 2012
In the Zone | Forex Signals | Automated Forex Trading
→ #
[...] ECB’s delay in offering a strategy for rescuing the eurozone adds pressure on Germany to clarify how far it is willing to go to revive Europe’s economy [...]