Global stocks cool, dollar weakens before Fed policy meeting
(Reuters) – World shares slipped from record highs on Tuesday as surging Chinese stocks took a breather and investors began to move to the sidelines before the Federal Reserve’s policy meeting.
The dollar also weakened and Wall Street was expected to open lower, with more macro data and company earnings set to give the Fed its latest look at the U.S. economy.
European bourses also fell, while the dollar’s decline saw the euro reach a three-week high and helped the pound recover after weak UK growth data caused it to tumble.
Britain’s quarterly growth came in at 0.3 percent, below forecasts of 0.5 percent and the slowest pace in more than two years.
The figures came just nine days before a British election, which is already brewing doubts about Britain’s future cohesion and its membership of the European Union.
“I think the real risk is so much uncertainty,” said Societe Generale strategist Kit Juckes. “We could have two elections in 12-18 months, and that would just see a cacophony of policy suggestions that would only add to that uncertainty.”
The pound dropped to $1.5188 and to 1.3950 versus the euro, then rebounded to $1.5295 and 1.3980 euro by 1200 GMT (8.00 a.m. EDT).
Britain’s FTSE stock index, which has been riding a wave of European highs, was left 1 percent lower, although it fell less than Germany’s DAX and France’s CAC 40. [.EU]
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan had followed Wall Street lower, dropping 0.5 percent, but only after touching its highest since January 2008.
The main culprit was Chinese shares, which dropped 1.4 percent. They had almost doubled in value since October, when Western and domestic market-friendly trading links were set up. Hopes monetary policy would ease also helped.
