Global stocks fell on Thursday, reversing some of the previous day’s rally, after better than expected US economic data supported the Federal Reserve’s belief that further monetary tightening is required.
The S&P 500 fell 1.8 per cent in late morning trade after US third-quarter GDP growth was revised higher to 3.2 per cent, from 2.9 per cent in November. Weekly initial jobless claims numbers were also lower than expected at 216,000, below the 222,000 forecasted by economists. The tech-heavy Nasdaq Composite index slid 2.7 per cent.
The declines on Wall Street also spread to European stocks, which had earlier wavered between small losses and gains. The Stoxx Europe 600 fell 1 per cent, while the UK’s FTSE 100 gave up earlier rises to trade 0.4 per cent lower. Earlier, the MSCI Asia Pacific rose 0.8 per cent, as the dust continued to settle on the Bank of Japan’s decision to relax its policy of pinning bond yields near zero earlier this week.
The losses came as the US economic data dented appetite for interest rate-sensitive short-term government debt. The two-year Treasury yield rose slightly to 4.24 per cent.
Longer-term government debt continued to steady after being rocked by the BoJ’s surprise announcement on Tuesday. The 10-year US Treasury yield fell by 0.01 percentage points to 3.67 per cent, while yields in the eurozone and the UK climbed slightly.
In currency markets, the pound fell following data showing the UK economy contracted by a larger than expected 0.5 per cent in the third quarter. Sterling traded 0.4 per cent lower against the dollar at $1.204.
The figures suggested the anticipated downturn in the UK economy could arrive sooner than previously expected, said Investec economist Ellie Henderson.
“The question now is whether the economy manages to eke out growth in [the fourth quarter] and avoid a recession at the end of the year,” she said.
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