• Thursday, May 23, 2024
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BusinessDay

Global stocks drop as dollar strengthens

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Stocks fell around the world and the dollar strengthened to a four-year high as US economic data boosted the outlook for higher interest rates. Commodities also headed for the worst quarter since 2008.

The MSCI All Country World Index fell 0.2 percent by 10am in London on Monday, with the Stoxx Europe 600 Index sliding 0.2 percent and Standard & Poor’s 500 Index futures dropping 0.4 percent. Hong Kong’s Hang Sang Index erased its gain for the year. The Bloomberg Dollar Spot Index added 0.2 percent and the kiwi weakened against all its major peers. The Bloomberg Commodity Index extended this quarter’s drop to more than 11 percent, the biggest decline since 2008.

The US economy grew at the fastest pace since 2011 in the second quarter, fuelling speculation over Federal Reserve rate increases as Japan and Europe consider further stimulus.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, is heading for its biggest quarterly advance since the third quarter of 2008. The dollar rose 0.3 percent to 109.63 yen and touched 109.75, its highest level since August 2008. It added 0.6 percent to 87.17 cents against its Australian counterpart, touching the strongest level since January.

The Fed mustn’t “fall behind the curve” as it weighs when to start increasing interest rates, Dallas Fed President Richard Fisher said in a Fox News interview, citing strengthening US growth and building wage-price pressures.

An index of executive and consumer sentiment in the euro area slipped to 99.9 in September from 100.6 a month earlier, the European Commission in Brussels said. That’s the lowest since November and in line with the median of 25 forecasts in a Bloomberg News survey.

New Zealand’s dollar plunged to as low as 77.09 US cents, the least since Aug. 5 last year, after the central bank said it sold a net NZ$521 million in August, the most since July 2007. Prime Minister John Key said the so-called Goldilocks level for the nation’s currency is around 65 US cents, Interest.co reported, citing comments to reporters.

Spanish and Italian government bonds dropped after Catalonian President Artur Mas and Spanish Prime Minister Mariano Rajoy clashed over whether the region can keep planning a November 9 referendum on separation. Spain’s 10-year yield increased six basis points to 2.25 percent and Italy’s increased five basis points to 2.44 percent.

Futures on the S&P 500 expiring in December dropped after the index sank the most in almost two months last week.

Commodity producers were down the most among the Stoxx 600’s 19 industry groups. The volume of shares changing hands today was 21 percent lower than the 30-day average, according to data compiled by Bloomberg.

Commerzbank AG slid 4 percent after a person familiar with the matter said the German lender faces a US inquiry into whether it broke anti-money-laundering laws. RWE AG dropped 2.2 percent after Germany’s largest power producer said a plan to sell its oil and gas unit has been delayed.

Balfour Beatty plc sank 22 percent after Britain’s biggest builder signalled the outlook for construction earnings has further deteriorated and said its chairman and interim chief executive officer will leave.

The MSCI Emerging Markets Index fell 0.6 percent to 1,017.64. The gauge has lost 3.2 percent this quarter, set for the steepest slump since the period ended June 2013.