Stocks dropped around the world as the dollar extended gains into a fifth day, with the potential for higher U.S. interest rates again roiling financial markets as the Easter vacation looms.
The Standard & Poor's 500 Index headed for its first weekly decline in six, while European shares have fallen every day this week. Raw-materials producers led losses as the Bloomberg Commodity Index headed for its worst week in two months. Oil was poised for the first weekly decline since mid-February as data showed a bigger-than-expected increase in U.S. stockpiles. The dollar strengthened against all 16 major peers. Gold fell to a one-month low.
After upsetting markets in August and again in early February, the prospect of higher U.S. interest rates is returning to the spotlight, as regional Federal Reserve presidents indicate support for higher rates as soon as economic data warrant. While the Fed's recent halving of its projection for this year's increases spurred stock gains and depressed the dollar, the more bullish tone from officials is now supporting a surge in the greenback that's hurting the mostly dollar-denominated commodity market.
“It's a clear situation that the Fed would like to move earlier rather than later just in order to get the policy rates away from the zero lower bound,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “The Fed wants to see market consensus on its move before it does move. Past experience has shown that if the Fed sets itself against market sentiment, its actions and rhetoric can cause selloffs in risk assets.”
Traders are pricing in only a 6% probability for a boost in borrowing costs at the central bank's April meeting, with the possibility of a June hike seen at 38%. In the meantime, investors are weighing international data and commentary for indications of the strength of global growth. Financial markets across most of Asia, Europe and North America will be closed on Friday for holidays.
STOCKS
The MSCI All Country World Index fell 0.9% as of 10:16 a.m. in New York, after sliding 0.8% on Wednesday. The S&P 500 declined 0.5%, for a third day of losses. Data showed Thursday that filings for U.S. unemployment benefits last week rose less than economists forecast, and orders for durable goods fell in February for the third time in four months.
“The market is seeing a little bit of a pause in momentum,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at
Stifel Nicolaus & Co. “We don't really have a catalyst right now. There's been a lot of repositioning in portfolios, but now we're looking ahead at what drives us beyond what central bank actions have been able to curry so far.”
The Stoxx Europe 600 Index retreated 1.5%, heading for its longest losing streak in six weeks. The volume of shares changing hands was 30% lower than the 30-day average.
Anglo American Plc and ArcelorMittal lost at least 7%, dragging a gauge of European miners toward its lowest level in three weeks. Tullow Oil Plc and SBM Offshore NV tracked declines in crude prices. Next Plc slumped 13 percent after cutting its annual sales-growth forecast.
Europe's benchmark equity gauge is on track for a 1.8% weekly drop. It hasn't posted back-to-back gains since it reached a two-month high on March 14, signaling a loss of momentum for the rally that more than halved its 2016 decline.
