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Monday, January 24, 2022

Europe shares rise, US falls before Fed statement

Europe shares rise, US falls before Fed statementNEW YORK: Stocks on Wall Street slipped and shares in Europe rose on Wednesday, reflecting a policy divergence between the Federal Reserve and the European Central Bank, while oil prices fell as data indicated U.S. crude inventories were at a new record high.

U.S. stocks were lower ahead of the Fed’s highly anticipated policy statement at 2 p.m. (1800 GMT) and news conference half an hour later, with the U.S. central bank expected to lay the groundwork for its first interest rate hike in nearly a decade.

The Fed is weighing whether the U.S. recovery can hold up against collapsing oil prices, which are taking a toll on segments of the economy, and a soaring dollar that already has eaten away at profits of U.S. multinational corporations.

Expectations of the first Fed rate hike since June 2006, coupled with the start of the ECB’s asset-buying program last week, have driven down the euro against the dollar and sparked a rally in European stocks.

The FTSEurofirst 300 index of top European shares rose 0.4 percent at 1,590.14 points, while MSCI’s all-country world index of equity performance in 46 countries was up 0.12 percent.

The FTSEurofirst 300 is up 16 percent so far this year and Germany’s DAX up 22 percent.

“The (U.S. stock) market is going to have trouble with interest rates the rest of the year,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“Oil might be pressuring things a little bit,” he said. “There’s a lot in there for the market to be very volatile today.”

The Dow Jones industrial average fell 72.64 points, or 0.41 percent, to 17,776.44. The S&P 500 slid 6.27 points, or 0.3 percent, to 2,068.01, and the Nasdaq Composite lost 12.19 points, or 0.25 percent, to 4,925.25.

The dollar has strengthened against most major currencies as two dozen central banks around the world ease monetary policy and weaken their currencies against the greenback at the same time that the Fed is on track to tighten.

The dollar was down 0.17 percent against the yen, at 121.14 yen, and was weaker against the euro, which last traded up 0.1 percent at $ 1.0608.

Investors expect the Fed to likely drop the word “patient” from its policy statement with respect to raising rates, which could pave the way for an increase as early as June.

Brent oil prices hovered near $ 53 a barrel on oversupply concerns. U.S. crude stocks rose nearly three times as much as expected last week, as storage at the Cushing, Oklahoma oil hub reached a new record, data from the Energy Information Administration showed.

Brent for May delivery fell 33 cents at $ 53.18 a barrel.

U.S. crude fell for a seventh straight session, hitting a six-year low at $ 42.03 a barrel. It was last down $ 1.10 at $ 42.36.

U.S. medium and long-dated Treasuries yields hit multi-week lows.

Benchmark 10-year yields hit 2.01 percent, their lowest level since March 2, while 30-year yields hit 2.56 percent, their lowest level since Feb. 26.

U.S. 10-year notes rose 9/32 in price to yield 2.0279 percent. U.S. 30-year bonds added 22/32 in price to yield 2.5828 percent.

Investors snapped up 3.3 billion euros of 10-year German Bunds at a sale, or almost twice the demand seen last month, as concern grows the ECB’s bond buying is creating a shortage of top-rated debt.

The bonds were auctioned to yield 0.25 percent, half the rate offered by the bond and down one-third from 0.37 percent at the previous sale.

Copyright Reuters, 2015

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