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European equities fell while German government bonds hovered at their weakest levels since mid-July as expectations rose for central banks to withdraw their anti-crisis monetary stimulus programs.
The regional stock index Stoxx Europe 600 lost 1.1 percent in early trading after losing 0.5 percent in the previous session. The London FTSE 100 lost 0.8 percent.
The European Central Bank meets on Thursday and investors expect it to announce a slowdown in its bond purchases after the economic outlook improves.
The pandemic emergency purchase program of the ECB amounting to 1.85 billion analysts generally assume that this will slow down to around 60 billion euros.
In the US, the Federal Reserve is also expected to cut its monthly bond purchases by $ 120 billion.
After major improvements in business and labor demand, St. Louis Fed President James Bullard said in an interview with the Financial Times that “the big picture is that the rejuvenation will start this year and end sometime in the first” . Half of next year ”.
Marija Veitmane, senior strategist at State Street Global Markets, said it made sense for stocks to give way at this point but did not expect a large correction as it was widely expected that central banks would keep rates at all-time lows.
“This is a time you could take a small step down in terms of risk aversion, but it is not the time to change risk aversion,” she said. “There’s a big difference between tapering and rate hikes.”
The yield on the 10-year German government bond, which is developing in the opposite direction to its rate and serves as a benchmark for the eurozone’s borrowing costs, fell by 0.01 percentage points to minus 0.325 percent. However, it remained near the highest level in two months. The US 10-year Treasury yield fell 0.02 percentage points to 1.358 percent after hitting its highest level since mid-July on Tuesday.
The futures markets signaled that Wall Street’s blue-chip S&P 500 stock index would fall 0.4 percent in early New York deals after closing 0.3 percent lower Tuesday. Contracts that bet in the direction of the technology-oriented Nasdaq 100 also fell 0.4 percent.
In Asia, the Japanese Nikkei 225 rose 0.9 percent for the eighth straight year as investors bet the successor to outgoing Prime Minister Yoshihide Suga unleashed a wave of stimulus measures to fight the spread of the coronavirus.
Equity markets fell across the rest of the region, reflecting the declines on Wall Street in the previous session.
The CSI 300 index in mainland China fell 0.4 percent and the Hang Seng index in Hong Kong fell 0.4 percent. South Korea’s Kospi 200 lost 0.8 percent.
The dollar index, which measures the US currency against six others, was flat. The euro remained stable against the dollar, buying $ 1.1842. Brent crude rose 0.6 percent to $ 72.13 a barrel.