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US stocks fell and Treasury yields edged higher after the minutes from the Federal Reserve’s June monetary policy meeting showed officials intend to resume raising interest rates after a pause last month.
Wall Street’s benchmark S&P 500 index was down 0.2 per cent in afternoon trading on Wednesday and the tech-heavy Nasdaq Composite shed 0.1 per cent. The two-year Treasury yield, which moves with interest rate expectations, rose 0.01 percentage points to 4.94 per cent, nearing the four-month high hit on Monday. The moves in both markets were relatively modest, given the minutes were roughly consistent with the Fed’s statement in June immediately following its policy-setting meeting.
“Almost all” officials who participated in the June Federal Open Market Committee meeting said that additional increases in interest rates would be appropriate, citing risks including the “tight” labour market, the minutes revealed on Wednesday.
The US central bank opted to keep the federal funds rate steady in June, at a target range of between 5 per cent and 5.25 per cent, the first pause in its aggressive year-long campaign to quash inflation.
The minutes come ahead of US payrolls data, due out on Friday. The US labour market has remained remarkably strong in the past year, even as the Fed has delivered a series of interest rate raises. Economists polled by Bloomberg expect hiring to have slowed in June, but the median forecast from that survey has underestimated the jobs data for every one of the past 14 months.
Meanwhile, European stocks ended the day lower, as weaker than expected economic data from China weighed on the region’s basic materials and energy stocks.
Europe’s region-wide Stoxx 600 fell 0.7 per cent and France’s Cac 40 shed 0.8 per cent. London’s energy-heavy FTSE 100 fell 1 per cent and hit its lowest level since the end of March, dragged down by steep declines in energy and utilities stocks.
The FTSE is down 0.1 per cent since the start of the year, falling far behind its regional peers, as domestic inflation also damped investor sentiment.
China’s closely watched Caixin services purchasing managers’ index came in at 53.9 on Wednesday, down from 57.1 for May and below consensus estimates of 56.2. Readings above 50 indicate an expansion in activity.
“The services sector recovery appears to be slowing after the initial strong burst of growth immediately after China dropped zero-Covid policy,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
“This warrants a measured easing approach but not a mega stimulus. Limited fiscal, quasi-fiscal and targeted monetary policy measures are likely to follow,” he noted.
China’s CSI 300 dropped 0.8 per cent and Hong Kong’s Hang Seng index lost 1.6 per cent following the data release. Japan’s Topix was flat.
Oil prices extended their rise from the previous session, spurred by the announcement that two of the world’s top producers, Saudi Arabia and Russia, planned to cut supply in August.
Brent crude, the international benchmark, added 0.6 per cent to $76.71 a barrel. West Texas Intermediate, which is based on US oil prices, rose 3 per cent to $71.91 a barrel.
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