By Sinéad Carew and Amanda Cooper
NEW YORK/LONDON (Reuters) -MSCI’s global equities gauge fell on Wednesday while the dollar rose and gold prices dipped, as investors digested cautious comments from Federal Reserve Chair Jerome Powell about when the central bank might next cut U.S. interest rates.
In his first remarks since the Fed meeting ended with a rate cut last week, Powell on Tuesday underlined the need for policymakers to balance the competing risks of high inflation and a weaker jobs market in their next monetary policy decisions.
Traders were still pricing in a rate cut in October, according to CME Group’s FedWatch tool.
“Despite a fairly quiet day in terms of major directional market drivers, equities have trended lower on anxiety over whether or not the Fed cuts rates at each meeting for the balance of this year,” said Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, California. He pointed to Powell’s comments along with economic data released on Wednesday and anxiety ahead of an inflation reading due Friday.
Wednesday’s data showed sales of new U.S. single-family homes surged in August by 20.5% to a seasonally adjusted annualized rate of 800,000 units. Economists polled by Reuters had forecast a drop to 650,000 units. July sales were revised upward to 664,000 units from the 652,000 previously reported.
The stronger-than-expected housing market data could suggest an economy where the Fed would not need to cut rates, Goldman said.
Investors will have to wait until Friday for the Personal Consumption Expenditures August report, which includes the Fed’s preferred inflation measure.
With some investors also pointing to Powell’s comment on Tuesday that asset prices appeared fairly highly valued, Wall Street marked its second straight day of declines on Wednesday after pushing to record highs on Monday.
The Dow Jones Industrial Average fell 171.50 points, or 0.37%, to 46,121.28, the S&P 500 fell 18.95 points, or 0.28%, to 6,637.97 and the Nasdaq Composite fell 75.62 points, or 0.33%, to 22,497.86.
MSCI’s gauge of stocks across the globe fell 3.21 points, or 0.33%, to 978.95.
Earlier, the pan-European STOXX 600 index closed down 0.19%. In contrast, European defence stocks closed 1.5% higher after U.S. President Donald Trump said he believed Ukraine could retake all its land occupied by Russia, marking a sudden shift in rhetoric in Kyiv’s favour.
Gold prices eased from the previous session’s record highs as the U.S. dollar firmed while investors hunkered down for the upcoming economic data releases, seeking further cues on the Fed’s policy path.
Spot gold fell 0.86% to $3,731.62 an ounce. U.S. gold futures fell 0.36% to $3,767.10 an ounce.
In currencies, the U.S. dollar gained against the yen, the Swiss franc and the euro after Powell struck a cautious tone, while the New Zealand dollar eased following the appointment of a new central bank chief.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.66% to 97.87.
The euro was down 0.66% at $1.1737 while against the Japanese yen, the dollar strengthened 0.83% to 148.85. Against the Swiss franc, the dollar strengthened 0.54% to 0.795.
New Zealand’s kiwi weakened 0.77% versus the greenback to $0.5811.
In government bond markets, U.S. Treasury yields inched higher, driven by an increase in corporate and government bond supply, while investors were still digesting Powell’s comments.
The yield on benchmark U.S. 10-year notes rose 2.9 basis points to 4.147%, from 4.118% late on Tuesday while the 30-year bond yield rose 1.5 basis points to 4.7517%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 3.4 basis points to 3.604%.
Oil prices surged to a seven-week high and settled up more than 2%, as a surprise drop in U.S. weekly crude inventories added to a sense in the market of tightening supplies amid export issues in Iraq, Venezuela and Russia.
U.S. crude settled up 2.49%, or $1.58, at $64.99 a barrel and Brent settled at $69.31 per barrel, up 2.48%, or $1.68, on the day.
In cryptocurrencies, bitcoin gained 1.36% to $113,558.60.
(Reporting by Sinéad Carew, Noel John, Amanda Cooper and Gregor Stuart Hunter; Editing by Sam Holmes, Sharon Singleton, Barbara Lewis, Ed Osmond, Edmund Klamann and Deepa Babington)
