European stocks are lower as softer oil prices weigh on the energy sector, while the dollar firms and bond yields are steady as traders tweak US rate rise expectations.
After a mixed Asia-Pacific session, where Tokyo rallied but Hong Kong retreated, the pan-European Stoxx 600 index is down 0.5 per cent, led lower by shares in miners as base metal prices whither, writes Jamie Chisholm.
The European Oil and Gas index is off 0.9 per cent as Brent crude loses 1.5 per cent to $49.22 a barrel after the American Petroleum Institute late on Tuesday said oil inventories in the week to August 19 rose more than market forecasts.
Brent had jumped above $50 in the previous session following unconfirmed reports Iran was sending positive signals about supporting a co-ordinated effort among major producers to freeze output and restore some balance to the market.
US index futures suggest the S&P 500 will dip 3 points to 2,184, leaving it just 6 points shy of the record closing high hit last week.
The Wall Street barometer strengthened 0.2 per cent on Tuesday as the housing sector was buoyed by well-received results from Toll Brothers and data showing new home sales in the US rose 12.4 per cent month-on-month in July.
The additional evidence of an improving housing market has encouraged some investors to shorten the odds on whether the Federal Reserve will increase borrowing costs in the coming months.
The probability of the Fed lifting rates in September has risen to 28 per cent, from 22 per cent a week ago, according to Bloomberg’s interpretation of futures markets. Gold, which is sensitive to monetary policy expectations, is down $1 to $1,336 an ounce.
“A housing recovery supports the Fed’s case for normalising monetary policy. Inflation has a habit of trailing the property market higher. Understandably, more Fed officials recently felt uncomfortable that rates may have been too low for too long. Janet Yellen, Fed chair, may echo this concern at the Jackson Hole Symposium,” said analysts at DBS.
Ms Yellen is due to deliver a speech at Jackson Hole on Friday, and in the meantime the dollar index, which measures the greenback against a basket of its peers, is up 0.1 per cent at 94.67, on track for a fourth-straight day of gains, following last week’s five-session losing streak.
US government 10-year bond yields are barely changed at 1.55 per cent, while equivalent German Bunds are also becalmed at minus 0.09 per cent after data showed the country’s GDP growth slowed to 0.4 per cent in the second quarter.
The euro is easing 0.1 per cent to $1.1288 as investors absorb news of a powerful earthquake in Italy.
Dollar strength is chipping away at the yen, which is 0.1 per cent weaker at ¥100.34 against its US counterpart on Wednesday. The softer yen was enough to give Japanese exporters a boost, leaving the broad Topix benchmark up 0.7 per cent and the Nikkei 225 0.6 per cent higher.
Australia’s S&P/ASX 200 inched up by 0.1 per cent, although investors were kept busy with results as Qantas reported record underlying profit, and Wesfarmers, the supermarket-to-coal conglomerate that recently bought UK DIY retailer Homebase, saw net profit drop 83 per cent owing to A$1.8bn of asset impairments.
Hong Kong’s Hang Seng fell 1.3 per cent, while on the Chinese mainland the Shanghai Composite eased 0.3 per cent on profit taking in financials, though the tech-focused Shenzhen Composite was up 0.2 per cent.
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