👀 Copy Legendary Investors' Portfolios in One ClickCopy For Free

GLOBAL MARKETS-Stocks buckle, dollar stirs as divided Fed disappoints

Published 2020-09-17, 04:53 a/m
© Reuters.
EUR/USD
-
USD/JPY
-
USD/TRY
-
XAU/USD
-
JP225
-
PEUP
-
RENA
-
DX
-
GC
-
LCO
-
CL
-
VOWG_p
-
MIAPJ0000PUS
-
BABA
-
SX7P
-
SXAP
-
SXPP
-

* European, Asian stocks, S&P500 futures down 1%

* Outflows from U.S. tech shares continue

* Fed suggests low rates until 2023

* Dollar gains broadly, yen eyes Suga's policies

* Oil and metals eased back by risk-off mood

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

*

By Marc Jones

LONDON, Sept 17 (Reuters) - The dollar stirred and equities recoiled on Thursday after a divided U.S. Federal Reserve dented stimulus hopes, TikTok's tug-of-war clobbered tech stocks and dire European car sales underscored coronavirus troubles.

Traders were also watching Bank of Japan and Bank of England meetings as well as plenty more too, but the tone was set by the events overnight at the Fed and in the tech war.

The Fed extended its 'dot plot' forecast of unchanged U.S. interest rates out to end-2023, but going no further than that, and upgrading growth forecasts so that GDP is now seen reaching pre-pandemic levels next year rather than in 2022. downtrodden dollar rebounded across the board, given it its best daily rise in over a week against a basket of other top currencies =USD and punting the euro EUR= back under $1.18. /FRX

Bond markets seemed less enlivened with U.S. Treasuries and German Bunds both quiet in early European trading GVD/EUR though choppy equities markets were making up for it. .EU

Tech stocks shed 1.6% after U.S. President Donald Trump's had warned China's ByteDance should not keep control of the U.S. operations of social media platform TikTok, a move that had also seen Chinese heavyweight Alibaba (NYSE:BABA) drop more than 4% overnight. .SS

Banks .SX7P , automakers .SXAP and miners .SXPP were the biggest sectoral fallers though, all dropping as much as 2%. Volkswagen VOWG_p.DE , Renault RENA.PA and PSA Group PEUP.PA fell between 2.5% and 3% after industry data showed European car sales fell by 17.6% in August. who were expecting more input from Fed monetary policy after the adoption of an average-inflation target regime remained disappointed," UniCredit analysts wrote in a note.

"While the Fed expects the Fed funds rate to remain flat through 2023, it will need more time to assess the status of the economy and to change its remaining tools accordingly."

The stronger dollar inflicted some damage in emerging markets too. Turkey's battered lira hit its latest record low TRY= , Argentina announced new capital controls and there was a third straight day of falls for eastern European currencies. CEE/

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had lost 1% overnight after five straight days of gains while Japan's Nikkei .N225 shed 0.6%.

"In essence, high-tech shares were overbought and we've seen a correction since early this month," said Soichiro Monji, chief strategist at Nishimura Securities in Kyoto. "I think that is still continuing, with the Fed just being a fresh trigger."

The Fed said it would keep interest rates near zero until inflation is on track to "moderately exceed" the central bank's 2% inflation target "for some time." economic projections released with the policy statement showed most policymakers see interest rates on hold through to at least 2023, with inflation not breaching 2% over that period.

"Of course, sensible people wouldn't really hold anyone to macro forecasts that far out so we'll cross that bridge when we get to it," said Derek Holt, head of capital markets economics at Scotiabank in Toronto.

"Nevertheless, markets are priced for basically one outcome here and that is little inflation and no hikes for years to come."

BOJ, JOBS

The Australian dollar lost 0.4% to $0.7278 AUD=D4 , having erased earlier gains made after stronger-than-expected local jobs data.

The Chinese yuan also dropped about 0.35% to 6.7686 per dollar CNH=D4 , stepping back from a 16-month high hit on Wednesday.

The yen was little moved at 104.98 to the dollar JPY= having hit a 1-1/2-month high of 104.80 per dollar overnight.

With focus on new Prime Minister Yoshihide Suga, who is seen by some as a strong opponent of a higher yen, some traders said the market may be tempted to test his resolve on the currency.

"One interesting speculative trade in the near-term will be to long the yen ahead of the coming long weekend in Japan," said a senior trading manager at a major Japanese bank.

The Bank of Japan maintained its policy as widely expected. the dollar gained, oil prices gave up some of their big gains made on Wednesday on a drawdown in U.S. crude and gasoline inventories, with Hurricane Sally forcing a swath of U.S. offshore production to shut. O/R

Brent crude dropped 1% to $41.80 per barrel LCOc1 while U.S. crude CLc1 fell 1.2% to $39.68 per barrel. Gold also slipped 0.8% to $1,943.8 per ounce XAU= .

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Fed "dot plots"

https://tmsnrt.rs/2FEvjyV

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.