Investors in risk-off mode ahead of jobs data
NEW YORK, August 7, 2015
Weak earnings dragged stocks lower on Thursday and oil fell on continued oversupply concerns, while Treasuries prices rose ahead of US jobs numbers seen as key to determine the timing of a rate hike from the Federal Reserve.
Wall Street traded lower, weighed by biotech shares and on a second day of sharp declines in media companies after Viacom's revenue miss was linked to viewers increasingly shifting from cable television to online streaming.
Market participants were looking ahead to US jobs data on Friday that could give a strong pointer to when the Fed will raise interest rates for the first time in nearly a decade. The Fed next meets in mid-September and markets are split between a September or December hike.
"In a classic risk-off move, investors are selling equities and buying bonds," Goldman Sachs said in a note to clients.
"It is this uncertainty around timing that may - in part - be responsible for the risk aversion we're seeing today."
After the closing bell on Wall Street, the Dow Jones industrial average fell 120.72 points, or 0.69 per cent, to 17,419.75, the S&P 500 lost 16.28 points, or 0.78 per cent, to 2,083.56 and the Nasdaq Composite dropped 83.50 points, or 1.62 per cent, to 5,056.44.
Earlier, the pan-European FTSEurofirst 300 index fell 0.8 per cent with weak corporate results weighing on shares of Deutsche Post and Danish enzyme company Novozymes .
A gauge of stocks across the globe fell 0.55 per cent. Emerging market stocks slipped to their lowest in over two years on nervousness about the timing and scope of a US rate hike and continued weakness in commodity markets.
Crude futures set multi-month lows after a large drop in US crude inventories failed to boost prices.
Brent fell as much as 1.4 per cent to hit a low of $48.88 per barrel, its lowest since late January, before inching up 0.2 per cent in late trading. US crude set a day low of $44.20, not far from the six-year low of $42.05 hit in March.
"Prices are likely to consolidate or weaken further," said Frankfurt-based Commerzbank analyst Carsten Fritsch. "The perception is that oversupply will be there for much longer."
London copper edged up 0.1 percent after gaining as much as 0.8 percent, still near a six-year low hit earlier this week.
Sterling fell sharply against the US dollar after only one Bank of England policymaker voted for higher interest rates at a meeting in which the central bank said a strong pound and low oil prices would keep inflation subdued.
Sterling fell 0.6 per cent to $1.551, having traded as high as $1.5636.
The euro edged up 0.18 per cent versus the greenback at $1.0924, but the dollar index was on track for a second straight week of gains, lifted by a batch of economic data that, overall, has reinforced expectations that the Fed will raise interest rates next month.
The dollar index hit a 12-year high in March above 100 and has traded in a tight range between 96 and 98 for more than a month.
Driving the dollar was the view earlier in the year of the U.S. as the engine of global growth alongside an expectation of tighter monetary policy from the Fed according to Michael Arone, chief investment strategist for State Street Global Advisors' US Intermediary Business.
"The US economy is not doing fantastic, and Europe and Japan are growing a bit better than expected," he said. "I don't see (the dollar) climbing significantly higher from here."
US Treasuries prices rose on caution ahead of the US jobs report, while reduced inflation fears also supported long-dated Treasuries prices.
US 30-year Treasuries prices were last up 29/32 in price to yield 2.898 per cent compared with a yield of 2.943 per cent late Wednesday. Benchmark 10-year notes were last up 12/32 in price to yield 2.227 per cent, compared with a yield of 2.268 per cent late Wednesday. - Reuters
