Global stocks off highs,
dollar edges lower as Fed rate rise looms
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[March 03, 2017]
By Vikram Subhedar
(Reuters) - The dollar retreated on Friday after two days of gains while
world stocks pulled further back from all-time highs as investors
unwound positions on growing expectations that U.S. interest rates will
be hiked later this month.
Federal Reserve officials have lined up to sing about the need for
higher rates soon, sending the implied probability of a move this month
surging to 74 percent, from just 30 percent at the start of the week. [FEDWATCH]
Fed Chair Janet Yellen and Vice Chair Stanley Fischer are both due to
speak later on Friday and are expected to stick to the same tune.
U.S. stock futures were slightly lower, down 0.1 percent. Europe's
benchmark STOXX 600 eased although it was on track to end the week up
more than one percent.
French stocks outperformed on the day, with the bluechip CAC 40 <.FCHI>
rising 0.7 percent, led by banking shares, as far-right candidate Marine
Le Pen's chances in the country's presidential election dimmed.
The euro <EUR=> rose and the gap between French and German 10-year
government bond yields fell to its lowest in a month.
Signs that centrist Emmanuel Macron is gaining ground in the race to be
France's next president have helped calm markets fearful that anti-euro
Le Pen could deliver an electoral shock like those in Britain and the
United States last year.
"We saw a peak of panic in February when the focus was on Le Pen," said
DZ Bank strategist Christian Lenk. "It's always been clear that the odds
of Le Pen becoming the next president were quite low and now we see
confirmation of that in the polls."
Meanwhile, economic data in Europe continued to point to a brightening
recovery, with euro zone business activity growing at its quickest pace
in nearly six years in February and job creation reaching its fastest in
almost a decade.
The dollar index, which measures the greenback's strength against a
basket of six major currencies, eased about 0.1 percent but was poised
for its fourth straight weekly gain.
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A man walks past an electronic board showing stock prices outside a
brokerage in Tokyo, Japan, January 4, 2017. REUTERS/Kim Kyung-Hoon
U.S. dollar has been snapped up across the board as a March Fed hike is heavily
priced in," said Sean Callow, a senior currency strategist at Westpac.
"All it took was about a hundred comments from Fed officials, but markets have
finally decided that "fairly soon" means less than two weeks and that perhaps
three hikes this year means three hikes this year."
Expectations of a Fed rate hike soured the party on Wall Street, however, as
financials led major U.S. indices lower. They remain close to record highs.
total market value of global stock markets hit an all-time high of $56.7
trillion earlier this week, having added more than $4 trillion since Donald
Trump's election as U.S. president last November.
More than half of those gains were down to the rally in U.S. stocks, into which
investors have pumped money for four of the past five weeks, according to the
latest data from Bank of America Merrill Lynch and fund tracker EPFR.
Investors flocked to buy shares of the hottest technology stock offering in
three years, spurring a 44 percent pop on the first day of trading for Snap Inc,
the owner of messaging app Snapchat. Its debut saw the loss-making company's
market valuation soar to $28 billion.
In commodities, oil prices rose as the dollar edged away from a multi-week high,
though gains were held in check by unchanged Russian output for February, a sign
of its weak compliance on a global deal to cut supplies.
Benchmark Brent crude futures were up 0.3 percent at $55.26 a barrel after
closing down 2.3 percent in the previous session. WTI futures gained 16 cents,
or 0.3 percent, to $52.77.
(Additional reporting by Dhara Ranasighe and Wayne Cole in SYDNEY; Editing by
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