Stocks in Europe and Asia looked set on Monday for their worst monthly losses in at least three years, with investors still concerned about growth in China and the prospect of higher US interest rates.
Falling share prices helped put pressure on the dollar, though weekend comments from US Federal Reserve policymakers leaving the door open for a rise in interest rates as soon as next month kept it well above last week’'s seven-month lows.
Oil prices fell again both on the Fed rate outlook and as investors took profits on last week’s 10 per cent rise.
Just last week, after a sharp fall in Chinese shares sent global stocks tumbling, a rise in US rates for the first time since 2009 next month had seemed off the table.
However, a senior Fed official said in a speech at the annual Jackson Hole symposium that US inflation was likely to rebound, allowing rates to rise gradually.
“This is a market that is walking on glass; China seems to be the central theme feeding into a lot of these things, but today the focus is very much on US interest rates again,” said, James McGlew, executive director of corporate stock broking at Argonaut in Australia.
Global stocks
The pan-European FTSEurofirst 300 stocks index fell 0.5 per cent and was on track for its worst monthly performance since August 2011. Germany’s DAX was down 1.4 per cent. Markets in Britain were closed for a holiday.
Asian shares closed lower. MSCI’s main index of Asia-Pacific shares, excluding Japan, was down 0.5 per cent and headed for its biggest monthly losses in three years. Tokyo’s Nikkei 225 index closed 1.3 per cent lower, hit by weak Japanese industrial output data.
Chinese shares had another volatile session. The CSI300 index ended up 0.7 per cent, after falling 4 per cent at one point. The index was still down 11.8 per cent for August. The Shanghai Composite lost 0.8 per cent on the day and 12.5 per cent for the month
The dollar lost ground against both the euro and the yen as investors trimmed bets against low-yielding currencies used to invest in higher-yielding ones in so-called carry trades.
“Stocks markets are in focus and absence of risk appetite is acting as a headwind to the dollar,’’ said Niels Christensen, FX strategist at Nordea. “Having said that, with a September rate hike back in focus, I am biased towards more downside in the euro against the dollar.’’
Dollar vs other currencies
The dollar index, which measures the greenback against a basket of currencies, was last down 0.1 per cent. The euro was up 0.3 per cent at $1.1211 and the yen up 0.4 per cent at 121.26 to the dollar.
The uncertainty about when the Fed might raise rates kept yields on German government bonds, the euro zone benchmark, close to last week’s highs. Ten-year yields were last flat on the day at 0.72 per cent.
Brent crude fell as investors took profits after oil saw its biggest two-day rally for six years last week. Brent was last down $1.30 a barrel at $48.75 and, despite last week’s gains, heading for its fourth consecutive monthly decline.
Gold struggled over the Fed outlook, last trading around $1,131.80 an ounce in quiet trade with London on holiday.
“We think gold will likely come under further pressure as we near the Fed decision, as investors coalesce around the notion that the central bank will indeed move’’ and lift interest rates, said INTL FCStone analyst Edward Meir.