Expectations for rising US interest rates have pushed the dollar to multi-month highs
London (AFP) - Stock markets diverged Wednesday, while the dollar traded mixed amid returning expectations of multiple US interest-rate rises this year.
Investors were meanwhile spooked by North Korea’s threat to pull out of a historic summit.
After enjoying a relatively purple patch over the past week, investors were somewhat shaken by solid US retail sales data released Tuesday that pointed to a surge in the country’s inflation.
That in turn could push the Federal Reserve to hike borrowing costs three more times this year.
Such expectations have sent benchmark 10-year US bond yields to seven-year highs. The prospect of debt costing more to service hit equities, sending all three main Wall Street indices lower on Tuesday.
“US markets ended their recent winning streak after a rise in interest rate expectations pushed up yields and raised the prospect of four US interest rate rises this year,” noted Michael Hewson, chief market analyst at CMC Markets UK.
The losses spread to much of Asia and Europe on Wednesday.
Tokyo ended 0.4 percent lower, also after data showed Japan’s economy contracted in January-March for the first time in two years.
The dollar, which benefits from higher US rates, was holding above the 110 yen mark, or close to the highest level since early February.
The euro traded meanwhile around the weakest level this year, with a series of soft economic data out of the eurozone denting the prospects of an end to the European Central Bank’s crisis-era stimulus. The pound continues to be dampened by Brexit uncertainty.
- ‘Eye on North Korea’ -
North Korea moved back into the spotlight as it threatened to cancel next month’s historic summit between Kim Jong Un and Donald Trump if Washington seeks to push Pyongyang into unilaterally giving up its nuclear arsenal.
The announcement came as a shock after months of rapid diplomatic rapprochement that has fuelled hopes for peace on the peninsula.
Earlier Wednesday it cancelled a meeting with South Korea at the last minute, blaming joint US-South Korean military exercises, which it called a “rude and wicked provocation”.
Pyongyang’s shock announcement came as investors are juggling several other global issues, including the outcome of Trump’s decision to pull out of the Iran nuclear deal, ongoing turmoil in the Middle East and the China-US trade spat.
There are hopes for a positive conclusion to the tariff stand-off between Washington and Beijing, but the latest round of talks will be closely monitored after a previous high-level meeting ended with no agreement and both sides far apart.
- Key figures around 1030 GMT -
London - FTSE 100: UP 0.1 percent at 7,731.19 points
Frankfurt - DAX 30: UP 0.3 percent at 13,002.90
Paris - CAC 40: DOWN 0.1 percent at 5,549.89
EURO STOXX 50: DOWN 0.2 percent at 3,556.84
Tokyo - Nikkei 225: DOWN 0.4 percent at 22,717.23 (close)
Hong Kong - Hang Seng: DOWN 0.1 percent at 31,110.20 (close)
Shanghai - Composite: DOWN 0.7 percent at 3,169.57 (close)
New York - Dow: DOWN 0.78 percent to 24,706.41 (close)
Euro/dollar: DOWN to $1.1785 from $1.1838 at 2100 GMT
Pound/dollar: DOWN to $1.3469 from $1.3506
Dollar/yen: DOWN to 110.12 yen from 110.33 yen
Oil - Brent North Sea: DOWN 40 cents to $78.03 per barrel
Oil - West Texas Intermediate: DOWN six cents to $71.25