Stocks flat as traders digest Fed comments, oil falls
Written by: Rodrigo Campos and Danilo Masoni
NEW YORK/MILAN, July 1 (Reuters) – World stock markets fell to start the quarter on Wednesday as the U.S. central bank chief said inflation expectations had fallen but policy would not be loose. Oil prices fell as optimism about US-Iran talks eased supply concerns.
Investors continue to monitor Japan’s possible intervention in the foreign exchange market after the yen hit 40-year lows against the dollar, even if it rebounded later in the session.
Speaking at a panel of central bankers in Sintra, Portugal, Federal Reserve chairman Kevin Warsh said inflation expectations and inflation risks have fallen in recent weeks. He said the US central bank would remain firmly committed to its 2 per cent inflation target and would “disappoint” anyone expecting loose monetary policy.
The comments, backed by rising expectations for the Fed to raise interest rates this year, put pressure on the dollar as inflation remains well above the central bank’s 2% annual target. Still, many analysts believe that the inflation picture will improve in the coming months.
“Nothing we’ve seen suggests any imbalances on the activity side or the inflation side are rapidly increasing,” said Steve Englander, head of global G10 currency research and North American macro strategy at Standard Chartered Bank’s New York branch.
“You can afford to wait and see how these long-term technological trends play out,” Englander added. “What we’re seeing is unit labor costs are very, very soft, and that’s ultimately what the Fed controls.”
The dollar index, which measures the value of the dollar against major currencies, increased by 0.17 percent to 101.41, and the euro decreased by 0.39 percent to $1.1376. The yen last remained horizontal against the dollar during the day.
While interest rate futures indicate the Fed will not take any action at its meeting later this month, a rise in September is priced in.
Also eyeing trade was Thursday’s economic data, which is expected to show U.S. employers added 110,000 jobs in June, according to the median estimate of economists polled by Reuters; The unemployment rate remained steady at 4.3%. The ADP National Employment Report released Wednesday showed private employment increased by 98,000 jobs last month, below economists’ forecast for a 118,000 job gain.
During the day, the Dow Jones Industrial Average decreased by 13.96 points, or 0.03%, to 52,305.24 points, the S&P 500 Index decreased by 16.13 points, or 0.22%, to 7,483.23 points, and the Nasdaq Composite decreased by 173.69 points, or 0.66%, to 26,040.03 points.
MSCI’s gauge of worldwide equities fell 2.51 points, or 0.22%, to 1,117.95. The pan-European STOXX 600 index fell 0.38%, while Europe’s broader FTSEurofirst 300 index fell 11.45 points, or 0.45%. Emerging market shares fell 0.96 points, or 0.06%, to 1,721.93 points.
