By Stephen Culp
NEW YORK (Reuters) -U.S. stocks followed their European counterparts lower and the dollar strengthened on Friday with few catalysts to stoke investor risk appetite amid lingering economic uncertainties and churning geopolitical tension.
All three major U.S. stock indexes were lower in early trading, with weakness in economically sensitive stocks, such as transport, housing and materials underperforming.
Gold was down sharply, retreating from its all-time high but remained above the $3,000 per ounce level it breached for the first time last week.
Chicago Federal Reserve President Austan Goolsbee said on Friday that it was an open question whether U.S. President Trump’s whirlwind tariff actions would lead to persistent inflation and the Fed needed more time to “sort through” the manner in which the tariffs played out.
A spate of central bank policy meetings held investors’ focus for much of the week, with the U.S. Federal Reserve, the Bank of Japan and the Bank of England all holding rates steady.
Caution appears to have been the common theme among monetary policymakers, most of whom have adopted a “wait and see” stance amid Trump’s erratic approach to tariffs and trade, which has fostered what Fed Chair Jerome Powell called “unusually elevated” uncertainty.
“This week, we saw the Fed generally following the consumer with expectations for higher inflation and lower growth,” said Mike Dickson, head of portfolio management at Horizon Investments in Charlotte, North Carolina. “It’s definitely weighing on things.”
Markets are awaiting clarification on the details of Trump’s reciprocal tariffs expected to go into effect on April 2.
Israeli airstrikes on Gaza and a huge blast from a Ukrainian drone attack on a Russian military airfield also helped dampen risk appetite and raise the appeal of safe-haven assets.
These geopolitical tensions “at a minimum are putting upward pressure on uncertainty that is already quite prevalent on the international stage with the tariffs”, Dickson added.
Adding to the turmoil was Britain’s Heathrow Airport being shut due to a huge fire at a nearby electrical substation; the ramifications of the detention of Turkish President Tayyip Erdogan’s main political rival; and Germany’s massive fiscal stimulus package which is on track to pass the country’s Bundesrat upper house of parliament on Friday.
On the economic front, with no major U.S. indicators on Friday, investors turn their focus on the coming week, which will include housing and industrial data, and is expected to culminate on Thursday with the Commerce Department’s third and final take on fourth-quarter GDP and its broad-ranging Personal Consumption Expenditures due on Friday.
DOLLAR GAINS
The Dow Jones Industrial Average fell 223.38 points, or 0.52%, to 41,733.07, the S&P 500 fell 23.48 points, or 0.41%, to 5,639.41 and the Nasdaq Composite fell 51.15 points, or 0.28%, to 17,641.63.
European shares slipped in the wake of central bank statements citing wariness in the face of global economic uncertainties.
Even so, the STOXX Euro 600 remained on track for a weekly gain, in a continuation of its outperformance year-to-date.
MSCI’s gauge of stocks across the globe fell 4.08 points, or 0.48%, to 839.39.
The pan-European STOXX 600 index fell 0.62%, while Europe’s broad FTSEurofirst 300 index fell 13.36 points, or 0.61%.
Emerging market stocks fell 10.24 points, or 0.90%, to 1,130.45. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.83%, to 588.44, while Japan’s Nikkei fell 74.82 points, or 0.20%, to 37,677.06.
The dollar gained ground against the euro, and was on course for its first weekly gain this month as the approaching tariff deadline prompted caution.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.19% to 103.99, with the euro down 0.22% at $1.0827.
Against the Japanese yen, the dollar strengthened 0.06% to 148.86.
U.S. 10-year Treasuries dipped but remained range-bound as investors juggled the possible impact of tariffs with the likelihood that the Fed will leave its policy rate unchanged for the time being.
The yield on benchmark U.S. 10-year notes rose 0.6 basis points to 4.239%, from 4.233% late on Thursday.
The 30-year bond yield rose 2.2 basis points to 4.5784% from 4.556% late on Thursday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 2.6 basis points to 3.931%, from 3.957% late on Thursday.
Crude oil prices edged higher and appeared set to notch a second straight weekly gain as new U.S. sanctions on Iran and the latest OPEC+ output plan raised expectations of tighter supply.
U.S. crude rose 0.32% to $68.29 a barrel and Brent rose to $72.07 per barrel, up 0.1% on the day.
Gold paused for a breather after a record run driven by safe-haven demand.
Spot gold fell 0.94% to $3,015.75 an ounce. U.S. gold futures fell 1.29% to $3,000.90 an ounce.
(Reporting by Stephen Culp; Additional reporting by Ankur Banerjee and Alun John; Editing by Alison Williams)
