Yen rallies, global stocks slide after Japan approves stimulus package
Wall Street stocks opened lower on Tuesday after weak U.S. economic data disappointed investors, further dragging on global equity prices after the approval of a fiscal stimulus package by Japan’s cabinet failed to cheer markets.
Oil rebounded strongly after having fallen as much as 10 percent in one week, but concerns about oversupply lingered.
Japanese Prime Minister Shinzo Abe’s cabinet approved 13.5 trillion yen ($132 billion) in fiscal measures on Tuesday. The easing moves were perceived as less aggressive than anticipated and the yen rallied to a three-week high against the U.S. dollar.
“There’s quite a lot of skepticism in the market as to whether this fiscal package can change anything,” said Alvin Tan, a strategist at Societe Generale.
Last week, the Bank of Japan announced easing steps that disappointed investors who had hoped for more.
“These governments are flailing about looking for something that will get it back on track, and certainly public confidence that they have really done enough has been something that has been difficult to achieve,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
MSCI’s world stocks index, which tracks shares in 45 nations, was down 0.75 percent.
Wall Street added to Monday’s modest losses after data showed inflation still muted and below the U.S. Federal Reserve’s 2 percent target, despite a better-than-expected rise in consumer spending in June.
The Dow Jones industrial average fell 111.97 points, or 0.61 percent, to 18,292.54, the S&P 500 lost 16.99 points, or 0.78 percent, to 2,153.85 and the Nasdaq Composite dropped 53.84 points, or 1.04 percent, to 5,130.36.
Dow component Pfizer was one of the biggest drags on the S&P 500 after revenue from its array of branded patent-protected medicines disappointed investors.
European stocks dropped to a three-week low, dragged down by banks, after Commerzbank’s shares slid to a record low after the bank warned that its earnings would fall this year.
