Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

GLOBAL MARKETS-Stocks, commodities pull back while dollar slips

Published 05/03/2011, 11:59 AM
Updated 05/03/2011, 12:00 PM
NDX
-
US500
-
BAER
-
GC
-
BMAm
-

* World stocks slip after 5-session winning streak

* U.S. dollar index gives up earlier gains

* Oil and other commodities lower (Recasts; updates prices, adds comment, details, second byline)

By Wanfeng Zhou and Barani Krishnan

NEW YORK, May 3 (Reuters) - A brief rebound in the U.S. dollar pushed stocks and commodities lower on Tuesday, but the greenback's resurgence was short-lived as investors sold the dollar's rally.

Still, investors fearing risk assets had risen too much, too fast, channeled some money back into cash and bonds as stocks and commodities ran sharply higher through April.

The dollar erased earlier gains against the euro and hit a record low against the Swiss franc on Tuesday, as expectations that U.S. interest rates would remain at record lows dulled demand for the greenback.

Oil fell more than 1 percent, backing away from 31-month highs, after India's interest rate hike to clamp down on inflation further doused the rally in energy markets.

Gold slipped over 2 percent from the record highs of the previous session as the greenback's rebound took away some of the shiny metal's luster as an alternative to currencies.

U.S. government debt prices rose initially in anticipation of lower supply of Treasury paper before paring gains.

Investors pulled back some of their exposure to equities garnered in April, buying bonds and turning to safe-haven cash amid worries that global economic growth could falter from its rapid pace, Reuters polls showed on Tuesday.

"After the strong performance of equity markets over the last months we are expecting to see a flattening in the market in the coming months," said Patrik Lang, head of equity research at Julius Baer.

"Some of the key forward-looking (economic) indicators are showing weaknesses meaning that the prospect and chance of equity growth over the coming months is limited."

U.S. stocks were trading lower at 11:02 a.m. EDT. The Dow Jones industrial average <.DJI> was down 2.38 points, or 0.02 percent, at 12,804.98. The Standard & Poor's 500 Index <.SPX> was down 4.69 points, or 0.34 percent, at 1,356.53. The Nasdaq Composite Index <.IXIC> was down 17.78 points, or 0.62 percent, at 2,846.30.

World stocks measured by the MSCI All-Country World Index <.MIWD00000PUS> shed 0.6 percent after five sessions of gains, and the emerging share index <.MSCIEF> lost 1.5 percent to a two-week low.

The MSCI world gauge gained 3.9 percent last month, and is up about 7.5 percent so far this year.

The 19-commodity Reuters-Jefferies CRB index <.CRB> was headed for its sharpest one-day loss in two weeks.

The dollar index <.DXY>, which tracks the dollar against a basket of major currencies, was flat after moving up 0.2 percent earlier.

Robust corporate earnings in the United States and Europe have buoyed equities recently, though some investors say the market is reaching overbought levels. High commodity prices, sparked by a weak dollar and supply worries, have also raised concern about company margins.

Nearly 80 percent of 339 S&P 500 <.SPX> companies that have so far reported first-quarter earnings have either beat or met analysts' forecasts, data from Thomson Reuters StarMine showed.

Investors are facing uncertain times vis-a-vis interest rates, with the European Central Bank having already tightened and the Bank of England under pressure to follow suit. India's bigger-than-expected hike of 50 basis points in interest rates on Tuesday spooked investors. [ID:nL3E7G30NW]

In the United States, the Federal Reserve has committed to keeping extraordinary low rates while signaling that its $600 billion bond purchase program will end as scheduled in June.

"The most uncertainty is probably about future economic policy ... a slowdown while policy is being tightened may be unnerving for investors used to three years of very easy policy conditions," said Chris Paine, associate director for asset allocation at Henderson Global Investors in London.

Reuters' poll of 56 leading investment houses in the United States, Europe ex-UK, Japan and Britain showed exposure to stocks falling to 51.3 percent in the month from 52.6 percent in March.

Appetite for cash rose to 5.1 percent in a balanced portfolio from 4.7 percent a month earlier. It was the highest exposure to cash -- where investors park money in times of uncertainty -- since September, around the time stock markets began rallying on prospects for renewed asset buying by the U.S. Federal Reserve.

Exposure to bonds rose slightly to 34.6 percent from 34.0.

The Reuters poll also showed gowning concern over the impact of a rising oil prices on growth.

"We're moving into seasonally weak conditions (for equities) with May and June here, and the macro story may be at risk if oil prices shoot to $130 per barrel or so. There are too many things that can go wrong," said Keith Wirtz, chief investment officer at U.S. firm Fifth Third Asset Management. (Additional reporting by Chuck Mikolajczak in New York, Josie Cox in Frankfurt, Neal Armstrong in London and Francis Kan in Singapore; Editing by Kenneth Barry)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.