Stocks sell-off slams back into Europe
New York (Oct 11) BLOOD ON THE STREET Sinking global shares have raised the stakes for U.S. inflation figures due later on Thursday. High inflation would only stoke speculation of more aggressive rate hikes from the Federal Reserve. On Wall Street, the S&P500's sharpest one-day fall since February wiped out around $850 billion of wealth as technology shares tumbled on fears of slowing demand. The S&P 500 ended Wednesday with down 3.29 percent, the Nasdaq Composite 4.08 percent and the Dow 2.2 percent. The bloodletting attracted the attention of U.S. President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates. "I really disagree with what the Fed is doing," Trump told reporters before a political rally in Pennsylvania. "I think the Fed has gone crazy" . Hawkish commentary from Fed policymakers triggered the sell- off in Treasuries last week and sent long-term yields to their highest in seven years. The surge made stocks look less attractive compared with
bonds while also threatening to curb economic activity and profits. "The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook," said Steven Friedman, senior economist at BNP Paribas Asset Management.
"It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion." YUAN A FLASHPOINT The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States. China's central bank has been allowing the yuan to gradually decline, breaking the 6.9000 barrier and leading speculators to push the dollar up to 6.9377 at 0602 GMT. China's move has forced other emerging-market currencies to weaken to stay competitive and drawn the ire of the United States, which sees it as an unfair devaluation. "The yuan has already weakened significantly, to offset the tariffs announced so far," said Alan Ruskin, Deutsche's global head of G10 FX strategy. "Further weakness could exacerbate concerns of a self-fulfilling flight of capital and a loss of control." The dollar was already losing ground to both the yen and the euro, as investors favoured currencies of countries that boasted large current account surpluses. The euro was at $1.1550 , up from a low of $1.1429 early in the week. The dollar lapsed to 112.17 yen , a retreat from last week's 114.54 peak. That left the dollar at 95.263 against a basket of currencies. In commodity markets, gold struggled to get any safety bid and edged down to $1,192.77 . Oil prices skidded in line with U.S. equity markets, even though energy traders worried about shrinking Iranian supply from U.S. sanctions and kept an eye on Hurricane Michael, which shut down some U.S. Gulf of Mexico oil output. Brent crude fell 1.6 percent to $81.75 a barrel. U.S. crude dropped 1.5 percent to $72.07
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