European stocks and Wall Street futures fell Wednesday as investors awaited Federal Reserve minutes that should provide clues as to the direction of the crisis-era support that has underpinned financial markets.
The European Stoxx 600 index for the entire continent fell 1.6 percent, while the FTSE 100 in the UK fell 1.3 percent. Futures trading indicated that Wall Street’s S&P 500 index would fall 1.1 percent at the opening bubble of New York, while the top 100 stocks of technology-focused Nasdaq Composite would lose 1.5 percent.
The measures came before the release of the minutes on Wednesday of the last monthly meeting of the US Federal Reserve.
Luca Paolini, chief strategist at Pictet Asset Management, said investors would scrutinize the minutes for signs that the world’s most influential monetary policymakers are considering cutting their $ 120 billion a month in bond purchases, which had helped support stock valuations and held an eye on government bonds. yields.
Fed Chairman Jay Powell has insisted that the bank will maintain its ultra-accommodative stance until the US labor market recovers from the pandemic.
“[But] the Fed cannot stay on the sidelines forever, ”said Paolini. “One danger is that the markets really start to see them as behind the curve,” and then fear “a panic response that will come too late.”
The yield on the 10-year US Treasury bond, which rose from about 0.9 percent at the beginning of this year, rose 0.01 percentage points to 1.65 percent on Wednesday.
Paul Jackson, head of asset allocation research at Invesco, said investors were also looking for excuses to consolidate some gains after a stock rally that started in March last year and a strong corporate earnings season on both sides of the Atlantic.
The European Stoxx 600 is up about 55 percent since mid-March 2020, and Wall Street’s S&P 500 has gained more than 80 percent.
“There’s a lot of good news in the price already, and it’s getting harder to see where the next catalyst for a next rally will come from,” said Jackson.
Another concern was “global growth good enough to get more inflation and central banks to lift their support,” he added. General consumer price inflation in the US was 4.2 percent in April compared to the same month last year – the largest increase since 2008.
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Inflation, affecting the real returns of stocks and bonds, “is now also a problem in the euro area,” said Maya Bhandari, portfolio manager at Columbia Threadneedle, after factory and retail sales boomed in April. The European Central Bank last week raised its growth and inflation expectations for the bloc, setting the stage for further debate as to whether it should slow the pace of its pandemic-driven bond purchases.
The yield on the German 10-year Bund fell 0.02 percentage point to minus 0.123 percent.
In currencies, the euro fell 0.1 percent against the dollar to $ 1.2206 and the pound lost 0.3 percent to fetch $ 1.4153 as the dollar strengthened against a basket of its peers. by 0.2 percent.
Global oil marker Brent oil, which briefly hit $ 70 a barrel for a second time during the pandemic on Tuesday, fell 1.9 percent to $ 67.43 a barrel.