Wednesday 21:00 GMT
US equity indices struggled to establish a clear direction as the mood on Wall Street was unsettled by persistent uncertainty over tax reform and sharp overnight losses for Asian shares.
The outlook for global technology stocks remained at the fore following sharp swings for the sector in recent sessions. Energy shares came under pressure as oil prices touched their lowest levels for two weeks.
At the close of trade in New York, the S&P 500 index was barely changed at 2,629, after swinging in and out of positive territory through the session. The tech sector sub-index was up 0.9 per cent, while energy was 1.3 per cent lower.
The Dow Jones Industrial Average was fractionally lower and the tech-heavy Nasdaq Composite rose 0.3 per cent.
In Europe, the pan-regional Stoxx 600 index ended 0.1 per cent lower while the Xetra Dax in Frankfurt shed 0.4 per cent. The FTSE 100 in London added 0.3 per cent as sterling remained under moderate pressure.
But it was moves for Asian stocks that really caught the eye. The Hang Seng index in Hong Kong tumbled 2.1 per cent, with the China Enterprises index down 2.8 per cent, while the Nikkei 225 in Tokyo suffered its biggest one-day drop for more than eight months.
China’s CSI 300 index shed 0.6 per cent.
“A couple of years ago, worries about China caused the last major correction in stock markets around the world,” noted Oliver Jones at Capital Economics.
“With the MSCI China Index plunging recently, could this be about to happen again? Possibly, but because that plunge is not connected to worries about China’s economy, any fallout is unlikely to be as severe or last as long.
“China’s economy does appear to have slowed a bit recently, and we expect growth there to ease next year too. But judging by online search volumes, concern about a crash in China’s economy — which previously spiked when Chinese equities dropped sharply — is low.”
The hesitant tone in US and European equity markets helped push government bonds higher on both sides of the Atlantic.
The yield on the 10-year US Treasury, which moves in the opposite direction to its price, was down 3 basis points at 2.33 per cent, while the two-year yield was 2bp lower at 1.81 per cent.
“The US two-year/10-year curve is threatening 50bp, the flattest in over a decade and a source of almost endless debate — and very little agreement — among commentators,” said Kit Juckes, analyst at SocGen.
“After the curve broke 50bp in May 2005, the S&P 500 rallied for two more years as the Fed raised rates nine more times, peaking at 5.25 per cent in mid-2006. Longer-dated yields now more accurately reflect expectations about the path of short rates.”
The 10-year German Bund yield fell 2bp to 0.30 per cent.
The dip in US yields had little impact on the dollar, as the greenback rose 0.2 per cent against a basket of currencies to its highest level for a fortnight. The euro was down 0.2 per cent at $1.1798 while sterling was 0.5 per cent weaker at $1.3379 — although the dollar was down 0.3 per cent versus the yen at ¥112.22.
US labour market data were relatively supportive for the dollar. ADP said private sector payrolls increased by 190,000 last month, down from October’s 235,000 jump, but slightly ahead of estimates.
The official US non-farm payroll report, due out tomorrow, is expected to show that 200,000 jobs were created in November.
The dollar was up 0.8 per cent against its Canadian counterpart at C$1.2790 after the Bank of Canada held its main interest rate at 1 per cent and indicated that it would remain cautious about raising rates further.
“Our base case is that the BoC waits until the second quarter before raising rates again,” said Christian Lawrence, senior market strategist at Rabobank.
“By that time we will have more data revealing how households have coped with the 50bp of tightening seen in the second half of 2017 and we should also have more clarity as to the outcome of Nafta negotiations.”
The Australian dollar was down 0.6 per cent at US$0.7562 after third-quarter GDP growth came in slightly short of expectations.
Oil prices continued to retreat as the markets digested the latest US inventories data from the Energy Information Administration.
Crude stocks fell by a much bigger than expected 5.6m barrels last week, although gasoline supplies rose far more than forecast. Brent crude settled at $61.22 a barrel, down 2.6 per cent after touching $61.16, the lowest level since November 17.
Gold fell another $2 to $1,264 an ounce — close to a two-month low — taking its decline so far this week to $26.
Additional reporting by Kate Allen in London and Edward White in Taipei
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