Turbulence in the global equity markets continued on Wednesday. It was driven by investor’s concerns over central bank policies.
The MSCI world stocks index which tracks share markets in 45 nations plunged 0.27 percent after Japanese stocks tanked.
According to analysts, the slide is caused by investors becoming increasingly wary of policymakers’ efforts in boosting growth, after watching the central banks actions in Australia and Japan with regard to galvanising economies.
The expectations on central banks were commented upon by Scott Fullman, chief strategist at Revere Securities: “The central banking issue is more of a factor of everybody trying to stimulate their economies, and how much more can you do?”
In the US, relief was there as the dollar staged a rally as investors started pitching positions ahead of Friday’s US nonfarm payrolls report. That data is expected to be a pointer to the possible rate hike in September by the Federal Reserve. This is despite the US GDP pushing back expectations on the Fed raising the borrowing costs, according to Reuters.
The dollar index .DXY was up 0.52 percent to 95.559, and recovered from six-week lows. The rising dollar also halted the price of gold from a further rise. When dollar gets stronger gold turns expensive for buyers holding other currencies.
Elsewhere, the UK services sector data published on Wednesday showed heavy shrinking of Britain’s economy since 2009. The Bank of England is meeting on Thursday to decide on cutting rates and the data will come in for reckoning on any rate-decision.
US Stocks Graced by Uptick in Oil Prices
In the US stock markets, a small surge in energy and financial shares lifted the US indexes. According to The Wall Street Journal, Dow Jones Industrial Average rose after seven consecutive sessions of losses, marking a slight departure from the general trend in the global equity markets.
In the oil market, the US crude climbed 3.3 percent on Wednesday and moved to $40 a barrel after data showed a drop in gasoline stockpiles. That was the biggest one-day gain since July 15.
Thanks to oil prices, energy companies in the S&P 500 were up 1.8 percent making them the biggest gainers in the index.
“The focus, at least near term, is definitely on energy prices and if we can hold $40 (oil) the market is fine here. If it can’t hold $40, there is going to be more pressure on the overall market,” said Tim Ghriskey, an analyst at Solaris Group, New York.
As for the barriers in global equity markets, apart from oil price concerns, worries over the strength of European banks are weighing on investors in augmenting a rally, one analyst said.
The US Treasury yields on Wednesday stood steady after jumping to Japan’s fiscal stimulus. Now investors are waiting for the US jobs report and Bank of England rate cut decision to see a new direction in global equity markets.
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