Stocks Fall as Prospects of Fed Rate Cut Recede
July 08 2019 - 10:19AM
Dow Jones News
By Joanne Chiu and Paul J. Davies
U.S. stocks fell Monday amid investors' doubts that the Federal
Reserve would cut interest rates as much and as quickly as
expected.
Strong U.S. jobs data on Friday reduced market expectations for
rate cuts from the U.S. central bank at its next meeting in July.
The Dow Jones Industrial Average dropped 0.6% at the open on
Monday, while the S&P 500 shed 0.5% and the Nasdaq Composite
was down 0.8%
European stocks were also lower, with the pan-European Stoxx
Europe 600 down 0.2%. Asia posted steep declines, with the
benchmark equity index in Shanghai dropping 2.6%, while Korea's
Kospi was 2.2% lower.
Cyrix Wang, a fund manager at China Alpha Fund Management, said
he has turned cautious on equities, as aggressive easing from the
Fed now looks less likely. "That raises concerns about whether the
current growth outlook is sustainable and the more expensive stock
valuation is justified," he said.
Germany's DAX slipped 0.4% as Deutsche Bank fell 4.7% following
the launch of yet another restructuring plan, which will see the
German lender cut nearly 20,000 jobs, slash its balance sheet and
significantly shrink its investment bank. The stock has had a
volatile trading session, and was initially up more than 4%.
"[Deutsche Bank's] business review is more radical than
expected, which we believe will support the shares in the short
term," wrote Anke Reingen, an analyst at RBC Capital Markets in
London. "However, as the plan pushes the profitability improvement
further out in time, we see more value elsewhere in the
sector."
Industrial production in Germany edged higher in May after
April's sharp contraction, suggesting that economic growth
continues to be subdued in the heart of Europe.
Meanwhile, bond prices rallied and yields fell across Europe and
in the U.S., reversing some of Friday's moves. The German 10-year
yield was minus 0.379%, while French and Italian yields also fell.
In the U.S., 10-year U.S. Treasury yields fell to 2.020%, from
2.044% on Friday. Yields fall as prices rise.
In South Korea, technology stocks led the broader market down
due to fresh concerns about Japan's export curbs on some
semiconductor and display materials after a survey of Japanese
voters showed broad support for the decision to tighten
controls.
Turkey's lira fell nearly 2% on concerns about central-bank
independence, after President Recep Tayyip Erdogan dismissed the
bank's governor over the weekend.
In commodities, gold was up 0.5% at $1,407.00 per ounce and
Brent crude oil was up 0.1% at $64.30.
--Alexander Osipovich and Shen Hong contributed to this
article.
Write to Joanne Chiu at joanne.chiu@wsj.com and Paul J. Davies
at paul.davies@wsj.com
(END) Dow Jones Newswires
July 08, 2019 10:04 ET (14:04 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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