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Stock markets fall on disappointment at US rate outlook

By AFP - Jul 08,2019 - Last updated at Jul 08,2019

A man carries a box as leaves from the offices of German bank Deutsche Bank in central London on Monday (AFP photo)

LONDON — World stock markets were softer on Monday on investor disappointment over the fading prospects of substantial cuts in US interest rates following better-than-expected jobs data last week, traders said. 

Taking their cue from an earlier sell-off in Asia, European stock markets were lower across the board as deep reductions in US borrowing costs appeared to be off the cards, at least for now.

Among the leading European indices, the blue-chip CAC 40 in Paris and the DAX 30 in Frankfurt were both down by just under half a per cent in mid-afternoon trade, while London’s FTSE showed a loss of around 0.1 per cent.

On the other side of the Atlantic, Wall Street opened down by around 0.3 per cent and headed lower in early trading.

“Global equities are quietly softer across the board on softer-than-expected German data, follow-through on Friday’s falling Fed rate cut blues, and a plethora of regional stories that added to the risk-off tone,” said OANDA analyst Edward Moya. 

“Deutsche Bank’s mixed review on their radical overhaul, [Turkish President] Erdogan’s sacking of his central bank chief, uncertainty on how quickly Iran will raise their nuclear enrichment programme, and Morgan Stanley’s downgrade of investment guidance on global stocks are keeping markets in the red,” Moya said.

While the dollar was steady against its main rivals, it surged against the Turkish lira after President Recep Tayyip Erdogan sacked the head of the country’s central bank following months of tensions over high borrowing costs.

Erdogan has repeatedly railed against high interest rates and called for them to be lowered to stimulate growth.

The US jobs data on Friday suggested that the world’s top economy is in better shape than anticipated and would not need substantial rate cuts to be kick-started.

Investors had been hoping that the Fed would cut US borrowing costs by as much as half a percentage point at its next policy meeting later this month, but such a likelihood now appears to be fading. 

Traders said investors’ focus would now switch to the congressional testimony of Fed chief Jerome Powell this week, with investors hoping he will provide some forward guidance on the bank’s plans.

Also up this week will be the release of minutes from the Fed’s June meeting, while US and Chinese officials are working to schedule top-level trade talks.

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