By IFCMarkets
US financial markets retreat continued on Thursday as markets adjust to expectations of tighter monetary policy. Dow Jones industrial average dropped 4.2% to 23860.46. The S&P 500 lost 3.8% to 2798.03 led by financial and technology shares. Both S&P 500 and DJI entered correction territory. The Nasdaq composite fell 3.9% to 7296.05. The dollar weakening resumed: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, inched 0.01% lower to 90.274. Index futures point to higher openings today.
Markets are still jittery after stronger than expected January jobs report was seen as strengthening the case for faster pace of interest rate hikes by Federal Reserve. Comments by Fed officials indicated central bank policy makers don’t see the market volatility as a reason to change the current policy stance of gradual rate hikes. New York Fed President William Dudley said 3 rate hikes in 2018 still seems to be reasonable forecast. Kansas City Fed President Esther George said 3 rate hikes this year is ‘reasonable baseline’. Minneapolis Fed President Neel Kashkari, a known dove, said the Federal Reserve is “a long way away” from having top raise rates due to rising inflation on the back of higher labor costs. Political uncertainty as the budget deal failed to get approved by Senate didn’t help boost investor confidence either. Federal government partially shut down for second time this year. Today the US Senate approved a budget deal, but it was too late to prevent a federal shutdown that was already underway.
European stocks resumed the pullback on Thursday as Wall Street turmoil resumed overnight and energy shares fell. The euro weakness continued while the British Pound’s advanced against the dollar after the Bank of England hinted interest rates could rise as early as May. The Stoxx Europe 600 index fell 1.6%. Germany’s DAX 30 tumbled 2.6% to 12260.29. France’s CAC 40 slumped 2% and UK’s FTSE 100 lost 1.5% to 7170.69. Indices opened mixed today.
Asian stock indices are all in red today as selloff resumed overnight. Nikkei fell 2.3% to 21382.62 despite resumed yen weakening against the dollar. Chinese stocks are down sharply as China’s consumer inflation slowed in January to seven month low: the Shanghai Composite Index is 4.05% lower and Hong Kong’s Hang Seng Index is down 3.3%. Australia’s All Ordinaries Index is down 0.9% as Australian dollar reversed more than half of previous session loss against the greenback.
Brent futures prices are extending losses today on higher global supply concerns. Prices fell yesterday as OPEC member Iran announced plans to increase production within the next four years by at least 700,000 barrels a day. Brent for April settlement fell 1.1% to end the session at $64.81 a barrel on Thursday.
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