European stocks and bond
yields fall after Fed flags weak inflation
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[August 17, 2017]
By Alasdair Pal
LONDON (Reuters) - European stocks and bond
yields fell in early trade on Thursday after the Federal Reserve
expressed concern over weak U.S. inflation, a trend which has clouded
the outlook for the world's largest economy.
Some policymakers argued against future rate rises until there was more
concrete evidence that inflation was moving back toward the Fed's
objective, according to minutes of the U.S. central bank's last policy
Money market futures <FFF8> are now pricing in about a 40 percent chance
the Fed will raise rates by December, compared with just under 50
percent before the Fed's minutes.
The pan-European Stoxx 600 <.STOXX> index was down 0.2 percent, snapping
a three-day winning streak and tracking earlier moves from the U.S. S&P
500 <.SPX> that fell after the minutes.
Germany's DAX <.GDAXI>, France's CAC 40 <.FCHI> and the UK's FTSE 100
<.FTSE> all fell 0.1 percent.
The prospect of slower removal of stimulus gave support to fixed income
assets with European government bond yields, which move inversely to
prices, heading lower. The benchmark German 10-year yield was down
nearly 2 basis points to 0.42 percent , coming off Wednesday's high of
0.47 percent. Most other euro zone yields fell 1-2 basis points.
Global currencies were higher in early European trade against the
dollar, which erased overnight gains to trade flat against a basket of
its six major rivals.
Along with the Fed minutes, the currency was also hit by U.S. President
Donald Trump's decision to disband two business councils after a number
of members quit in protest over his comments on white nationalists.
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A worker shelters from the rain under a Union Flag umbrella as he
passes the London Stock Exchange in London, Britain, October 1,
2008. REUTERS/Toby Melville/File Photo
"Trump dissolving his major business groups makes the investment community even
more pessimistic because this sets the stage for even more failure for him,"
Naeem Aslam, chief market analyst at Think Markets in London, wrote in a note.
Most Asian currencies rose overnight, with the Korean won <KRW=> up 0.3 percent
after tensions over North Korea continued to ease.
Trump on Wednesday praised North Korean leader Kim Jong Un for a "wise" decision
not to fire missiles towards the U.S. Pacific territory of Guam, after North
Korean media reported that Kim had delayed to decision while he waited to see
what the U.S. did next.
In commodities, London copper, aluminum and zinc hit multi-year highs on
expectation China's reform of its metals industry will curb supply against a
backdrop of robust demand.
Oil prices edged higher after new data showed U.S. crude stocks have fallen by
13 percent from a peak in March. Brent crude futures were at $50.36 per barrel,
up 0.2 percent from their last close.
Commodities, that are priced in U.S. dollars, also benefited from the weakness
in the currency.
(Reporting by Alasdair Pal, additional reporting by Nichola Saminather in
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