London (AFP) – Stock markets diverged Wednesday and the dollar firmed against most rivals ahead of an expected interest rate hike from the US Federal Reserve.
As the euphoria over the historic summit between US President Donald Trump and North Korea leader Kim Jong Un recedes, investors are focusing on macroeconomic issues with concerns over global trade causing some discomfort.
“With a rate hike widely expected, investors are focused on the Fed’s statement wording, economic projections and press conference for clarification on the future pace of interest rate hikes,” said Jo Horton, a senior economist at St. George Bank in Sydney.
Speculation about further increases was fuelled by data Tuesday showing US inflation at a six-year high in May.
And Greg McKenna, chief market strategist at AxiTrader said: “With oil up, wage pressures apparently building, and the US economy bouncing back strongly in the second quarter, the (Fed) is likely to be fairly forthright in their ascertainment that rates will need to continue to be increased — however gradually.”
The dollar continues to enjoy support against most other currencies ahead of the Fed decision, with the pound hamstrung by British Prime Minister Theresa May’s Brexit struggles after she made some big compromises to push through key legislation.
But the euro was up against the greenback ahead of the European Central Bank’s own policy meeting on Thursday, as it seeks to wind in its crisis-era stimulus.
– ZTE plunges –
On equity markets, Hong Kong’s main index dropped 1.2 percent with shares in Chinese telecoms equipment maker ZTE collapsing more than 40 percent as it resumed trading after agreeing to pay a massive fine over its handling of a US sanctions violation.
The firm suspended trading in April after Washington said it had banned American companies from selling crucial hardware and software components to it for seven years.
However, that was reduced to a $1 billion penalty, plus another $400 million in escrow to cover possible future violations, after a deal was hammered out between the US and China.
Oil prices meanwhile extended losses just over a week before OPEC and its partners including Russia meet in Vienna to talk about a production cap deal that has been key to a recovery in the commodity for the past two years.
There are worries OPEC kingpin Saudi Arabia and Russia will push to lift their output ceilings, though they are said to be facing opposition from other members of the cartel, including Iraq.
Adding to the price weakness was a report showing a rise in US stockpiles that indicates easing demand, while the International Energy Agency on Wednesday said that an oil production shortfall in Iran and Venezuela may cause OPEC and Russia to decide to open their taps more.
– Key figures around 1000 GMT –
London – FTSE 100: UP 0.2 percent at 7,719.32 points
Paris – CAC 40: UP 0.3 percent at 5,468.45
Frankfurt – DAX 30: UP 0.2 percent at 12,868.34
EURO STOXX 50: UP 0.2 percent at 3,480.91
Tokyo – Nikkei 225: UP 0.4 percent at 22,966.38 (close)
Hong Kong – Hang Seng: DOWN 1.2 percent at 30,725.15 (close)
Shanghai – Composite: DOWN 1.0 percent at 3,049.80 (close)
New York – Dow Jones: FLAT at 25,320.73 (close)
Euro/dollar: UP at $1.1760 from $1.1746 at 2100 GMT
Pound/dollar: DOWN at $1.3340 from $1.3374
Dollar/yen: UP at 110.60 yen from 110.36 yen
Oil – Brent Crude: DOWN 30 cents at $75.58 per barrel
Oil – West Texas Intermediate: DOWN 24 cents at $66.12