Global shares, which spent most of the day in negative territory, fell further after the Federal Reserve raised concerns that it may have ruled out large-scale asset purchases
Throughout much of Tuesday’s session there has been an overriding sense that fiscal and monetary authorities are bumbling their lines in the face of a dangerous plot twist for the global economy, pushing traders away from stocks and back into havens such as core government bonds.
Risk appetite improved somewhat after the Case-Shiller house price index rose more than forecast in June and a reading of US household sentiment rebounded from a five month low. These reports helped lift the S&P 500 but after the minutes of the Federal Reserve’s Open Market Committee were released in early afternoon in New York, it erased these gains to close almost flat.
The minutes showed some officials saw increased risk to economic growth but indicated that they were not prepared to resume large-scale asset purchases.
The yields on benchmark 10-year Treasuries fell slightly further after the minutes were released, down 6 basis points to 2.47 per cent.
The FTSE All-World equity index is down 0.3 per cent and industrial commodities are struggling to make headway. The yen, one of the favoured currencies in times of strife, is again flirting with 15-year highs against the dollar.
The Japanese unit’s strength stands in contrast to – indeed, is partly the cause of – the stock market’s slide into bear market territory. The Nikkei 225 is down 22 per cent since April’s peak, having lost 3.6 per cent on Tuesday as investors worried that the previous day’s announcement of stimulus measures by the government and the Bank of Japan were insufficient to drag the economy out of its slough. LINK
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