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While you were sleeping: Stocks slide

Wednesday 28th June 2017

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Equities on both sides of the Atlantic fell as central bank chiefs signalled an easing of monetary stimulus. 

Speaking in London, Federal Reserve Chair Janet Yellen did little to suggest US policy makers have altered plans for a third interest rate hike later this year, saying “it will be appropriate to the attainment of our goals to raise interest rates very gradually.”

“Yellen is expressing confidence that banking is stronger, economic growth is relatively firm and there’s not going to be a crisis in our lifetime,” Dennis Debusschere, Evercore ISI’s head of portfolio strategy and quant, told Bloomberg. “It’s sending a signal that they can continue on rising rates, despite the weaker inflation we’ve seen. That’s where the concern is in the market.”

In 3.19pm trading in New York, the Dow Jones Industrial Average fell 0.2 percent, while the Nasdaq Composite Index dropped 1.3 percent. In 3.04pm trading, the Standard & Poor’s 500 Index retreated 0.4 percent. 

The Dow slid as declines in shares of Verizon and those of Microsoft, recently down 1.7 percent and 1.3 percent respectively, outweighed gains in shares of JPMorgan Chase and those of Home Depot, recently up 1.3 percent and 1 percent respectively.

Shares of Alphabet, the parent of Google, slid after the European Union antitrust regulator slapped Google with a record US$2.7 billion fine for manipulating search results to favour some of its own services over those of rivals. 

"Just being put on notice can limit Google's strategic options into the future,” Matti Littunen, a digital media and online advertising analyst with Enders Analysis in London, told Reuters.

Indeed, complying might be the challenge.

The EU order “seems to be quite simple but is actually quite complicated in the sense that they leave it to Google to come up with a solution,” Ben Van Rompuy, a lecturer at Leiden University in the Netherlands, told Bloomberg. 

In Europe, the Stoxx 600 Index ended the session with a 0.8 percent drop from the previous close.

European Central Bank President Mario Draghi signalled the central bank might ease its monetary stimulus. 

“All the signs now point to a strengthening and broadening recovery in the euro area,” Draghi told the ECB Forum on Central Banking in Sintra, Portugal. “Deflationary forces have been replaced by reflationary ones.”

“As the economy continues to recover, a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments—not in order to tighten the policy stance, but to keep it broadly unchanged,” Draghi noted. 

The UK’s FTSE 100 Index slipped 0.2 percent, while France’s CAC40 Index declined 0.7 percent, and Germany’s DAX Index fell 0.8 percent.

Euro-zone bonds also declined, while the euro strengthened against the greenback. 

Draghi “offered the first inclination that central bank stimulus could soon be wound in,” Jasper Lawler, a market analyst at London Capital Group, wrote in a note, Bloomberg reported. “The notable switch in Draghi’s speech was using ‘transitory’ to describe global factors that have been pulling inflation lower.”



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