6 Months : From May 2019 to Nov 2019
By Nathan Allen
-- U.S. futures, European equities decline
-- Asian stocks mostly advance
-- Pound weakens amid continuing U.K. political uncertainty
U.S. futures and European stocks slipped Wednesday as investors awaited Federal Reserve Chairman Jerome Powell's congressional testimony, where he will face questions on the central bank's interest rate intentions.
Futures on the S&P 500 and the Dow Jones Industrial Average both fell around 0.2%. Futures don't necessarily predict moves after the market open. The yield on 10-year U.S. Treasurys rose to 2.101% from 2.058% on Tuesday. Yields and prices move in opposite directions.
Europe's pan-continental Stoxx Europe 600 fell 0.1% in afternoon trade to extend Tuesday's losses, dragged down by food-and-beverage and media stocks. Benchmark indexes in France and Germany also posted modest declines.
Banking stocks were among the region's best performers, with Germany's Deutsche Bank rallying 2.7% to recover some of its losses. Shares in the German lender dropped earlier in the week as investors reacted with skepticism to Chief Executive Christian Sewing's radical restructuring program.
Data showed the British economy returned to growth in May, reversing a two-month slowdown and easing fears of a contraction in the second quarter. A 24% rise in car production drove the uptick, as auto makers restarted factories they had idled in anticipation of Brexit, which was originally scheduled to take place in April.
However, analysts cautioned that the broader economic picture in the U.K. remains subdued, despite the improvement in manufacturing.
"Recent PMIs indicate that the service sector -- which makes up the lion's share of the U.K. economy -- has struggled to regain momentum amid mounting Brexit uncertainty," said James Smith, ING developed markets economist, adding that he expects business investment to resume its downward trend over the summer.
The pound rose slightly after the data but still hovered around multi-month lows against the euro, while the FTSE 100 index was flat in afternoon trade.
Global stock markets rallied in June amid hopes for an interest-rate cut, but strong jobs data from the U.S. reduced the case for such an intervention, adding to uncertainty around the Fed's policy direction.
Peter Dixon, senior economist at Commerzbank, said there are fairly good reasons for a rate cut in July or September, but warned that the central bank risks running out of firepower if it acts too soon.
"If the Fed front loads easing now while the economy is still robust and leaves less in its locker for when things really do start to slow down, that could very much be a problem for the U.S.," he said.
Aside from the Fed's policy outlook, Mr. Dixon said investors will be eager to see how Mr. Powell responds to a grilling from lawmakers over concerns that his independence is being undermined by pressure from President Trump, who has criticized him for allowing the dollar to become too strong.
Minutes from the central bank's recent policy meeting are due for release later Wednesday, which could provide additional detail on how officials viewed the economic environment.
Asian markets mostly closed higher, although Shanghai-listed stocks slipped after Chinese consumer inflation held steady in June. The consumer-price index rose 2.7% on year, in line with expectations, as slowing nonfood prices offset faster gains in food prices.
The Mexican peso continued to trade lower against the dollar on Wednesday after the country's finance minister Carlos Urzúa resigned on Tuesday, citing disagreements with left-wing President Andrés Manuel López Obrador's economic policy.
In commodities, global oil benchmark Brent crude rose 2.3% to $65.64 a barrel after data from U.S. industry group American Petroleum Institute on Tuesday showed a sharp drop in oil stocks. Gold fell 0.2%.
(END) Dow Jones Newswires
July 10, 2019 08:38 ET (12:38 GMT)
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