Global Stocks Follow Wall Street Lower

By Nathan Allen 

Global stocks dropped on Wednesday, a day after Wall Street indexes broke a weeklong winning streak amid lingering trade tensions and questions over the direction of Federal Reserve policy.

In Europe, the Stoxx Europe 600 was down 0.6% at the open, while Germany's DAX slipped 0.5% and the U.K.'s FTSE 100 fell 0.3%.

In Asia, China's Shanghai Stock Exchange dropped 0.6%, Korea's Kospi fell 0.1% and Japan's Nikkei 225 fell 0.4%

Hong Kong's Hang Seng was the region's worst performer, dropping 2% as protesters blocked access to the legislature, forcing lawmakers to postpone debate on an unpopular bill that would allow people to be extradited to China.

U.S. futures pointed to opening declines of 0.3% for the S&P 500 and the Dow Jones Industrial Average, extending yesterday's modest losses. Both indexes fell less than 0.1% on Tuesday.

Equity markets in the U.S. had risen sharply in the prior week after Federal Reserve officials hinted that the central bank might lower interest rates to offset the negative effects of trade disputes. However, some analysts say markets may have overestimated the likelihood of such a rate cut, given recent positive economic data.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said heightened expectations of a rate cut may now force the Fed to act sooner than intended to avoid disappointing the market and driving up stock-market volatility over the summer.

Later Wednesday, investors will be watching for May consumer inflation data in the U.S, which is expected to rise 0.1% from April's level -- the smallest monthly gain since January. Weak inflation is likely to fuel further speculation over the Fed cutting rates and may weigh on the dollar, according to forex broker FXTM.

In Europe, investors will be watching European Central Bank President Mario Draghi speak in Frankfurt later this morning for any hints that the ECB is considering a similarly dovish stance.

"By Draghi's own admission there was some discussion of further policy easing at last week's meeting, however given the weakness of Europe's banks, further cuts in rates could well do more harm than good," CMC Markets U.K. chief market analyst Michael Hewson said.

The yield on 10-year U.S. Treasurys slipped to 2.129% from 2.140% on Tuesday. Bond yields move in the opposite direction to prices. The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was flat.

In commodities, global oil benchmark Brent crude fell 1.8% to $61.16 a barrel, after data from the American Petroleum Institute showed that U.S. crude stockpiles climbed more than expected last week, and the U.S. Energy Information Administration lowered its forecasts for 2019 demand growth. Gold gained 0.7%.

Write to Nathan Allen at [e-mail]

(END) Dow Jones Newswires

June 12, 2019 04:18 ET (08:18 GMT)

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