Global stocks head for third straight session of losses

London — Global stocks headed for a third straight day of losses on Tuesday and the dollar rose after more US data reinforced the belief among investors that the Federal Reserve might stick with aggressive interest rate rises for longer.

The MSCI’s world index fell 0.3%, led by tech stocks which are often more sensitive to broader shifts in sentiment. Europe’s Stoxx tech subindex lost 0.3%, Hong Kong listed tech giants fell 1.8% and Korea’s tech-heavy Kospi benchmark shed 1%.

The oil and gas sector was lower after an almost 3.5% slide in crude oil prices overnight. Shell, BP and TotalEnergies were each down about 1%, and among the biggest drags on the pan-European index.

Having reached a more than three-month high last Thursday, MSCI’s world index is now entering what was shaping up to be a third straight session of decline.

Data released on Monday shows the US services industry activity unexpectedly picked up in November after a robust US payrolls report published on Friday — all of which raised doubts whether the Fed would go for smaller hikes in interest rates just yet.

“A reassuring trend was in place — policy tightening, leading to growth slowdown leading to slower inflation — which allowed this correction in risk assets and the dollar,” said Samy Chaar chief economist at Lombard Odier.

“Then we had two important bits of data that went the other way, a good job report, non-manufacturing ISM, which if not calling that trend into question, do show there will be bumps in the road.”

Aggressive US rate increases earlier in the year had caused stocks to tumble and US treasury yields and the dollar to soar.

The dollar held firm against most peers on Tuesday — at 136.6 yen, steady after a 1.8% jump the previous day, thanks in part to the services data, while the euro was at $1.0493 having fallen 0.45% the previous day.

Elsewhere, the Reserve Bank of Australia raised interest rates to decade highs and stuck with a prediction of further hikes, quashing any thought it was close to pausing. The Australian dollar gained 0.3% and the 10-year bond yield ticked higher.

The US 10-year yield was steady at 3.5735% after jumping almost 10 basis points on Monday after the services data.

Oil prices edged higher, as the implementation of sanctions on Russian seaborne crude oil eased concerns about oversupply, while the relaxing of China’s Covid-19 curbs bolstered the outlook for demand. Crude futures suffered their biggest daily drop in two weeks on Monday, after the US service sector data raised concerns that the Fed could continue its aggressive tightening for a while longer.

Brent crude futures were up 0.36% to $82.96 a barrel, while US crude rose 0.62% to $77.36.

Gold was at $1,770 an ounce having hit a five-month high above $1,809 on Monday.

Reuters