LONDON (Reuters) – Asian and European stock markets fell on Thursday after the last minutes of the US Federal Reserve meeting doubts about the recovery of the world’s largest economy and Wall Street beating recent record highs.
FILE PHOTO: Signage is seen outside the entrance of the London Stock Exchange in London, Britain. 23 Aug 2018. REUTERS / Peter Nicholls
MSCI’s broadest index of equities in the Asia-Pacific outside Japan had its largest daily decline in five weeks, while the MSCI World Axis Index, which tracks equities in 49 countries, was 0.6% to 0738 GMT.
The pan-European STOXX 600 was down 0.9% and London’s FTSE 100 was down 0.8%.
The Fed’s minutes of the July meeting, which were released on Wednesday, highlighted doubts about the US economic recovery, showing that the rapid labor market tensions seen in May and June were likely to slow down.
Several Fed policymakers have said they may need to adopt monetary policy to help get the economy through the coronavirus pandemic.
“Of course, the Fed agreed that the virus weighs heavily on the economy: is that a surprise? Apparently it was, ”Rabobank’s global strategist Michael Every wrote in a note to clients.
Despite the sluggish minutes, U.S. Treasury yields and the dollar have gone up with investors focusing on parts of the minutes that showed policymakers downplaying the need for yield caps and goals.
The dollar index, which measures the currency against a course of large peers, was choppy last night.
“The most important question for investors is whether the answers to the policy are sufficient to limit the economic damage,” hedge fund firm Brevan Howard said in an interim report published on Thursday.
“Many companies have solvency risks that are not addressed by lending; a debt overhang can not be cured by more loans, no matter how cheap it may be, ”the fund’s report added.
“Improved financial conditions are narrowly targeted at a handful of large companies and beneficiary stakeholders who need relatively little financial assistance. The result is that financial assets are expensive by many standard metrics.
“As long as a V-shaped recovery in risky assets fails a V-shaped recovery in economic activity, this tension is a recipe for increased volatility.”
Spot gold bounced back last night, after being empty on Wednesday after an almost empty week, when brands were Bullisher.
It was 0.6% up at 0748 GMT, at $ 1,940.4478 per ounce.
Oil prices fell as large producers warned of a risk of seeking recovery.
OPEC and its allies are pushing oil countries to pump above export targets to reduce further in August to September.
Brent crude was 32 cents, or 0.7%, at $ 45.05 per barrel, while U.S. oil was 38 cents, or 0.9%, at $ 42.55 per barrel.
It will take at least two years for the eurozone to fully recover from its deepest recession on record, according to a Reuters poll of economists.
Minutes from the European Central Bank’s July meeting are at 1130 GMT.
Germany’s benchmark 10-year Bund yield was at -0.473%, slightly changing after falling the past four days in a row.
Markets also remained cautious about acrimonious relations between US and China.
China’s trade ministry said the two countries had agreed to hold trade talks “in the coming days” to make their Phase 1 trade, which struck six months ago.
Report by Elizabeth Howcroft; Edited by Alex Richardson
.
