Global stocks market on Monday, March 13, stabilized as he dollar recovering from a three-day fall as investors braced for a potential interest rate hike in the United States, a Dutch election and the first G20 finance ministers’ meeting of the Trump era.
Strong U.S. employment data and talk that European Central Bank policymakers had begun thinking about how to raise interest rates as inflation returns saw market participants, particularly in bond and currency markets, start to price in higher borrowing costs.
Buying from the start of European trade on Monday halted three days of losses for the dollar which gained against both the euro and a basket of currencies.
Fed fund futures prices showed investors pricing in more than a 90 percent chance of an increase in U.S. overnight interest rates and the market’s attention is now firmly on the scale of tightening further out.
“Improved growth and inflation prospects are allowing developed market central banks to sketch their exits from extreme accommodation at varying speeds,” David Folkerts-Landau, group chief economist at Deutsche Bank wrote in a note to clients.
Sterling rose 0.4 percent against the dollar, however, ahead of a vote in Britain’s lower house of parliament on legislation that will give the government permission to trigger Britain’s exit from the European Union.
“The push and pull between solid growth momentum and political risks look set to continue in the near-term,” Folkerts-Landau said.
The world’s most powerful finance ministers and central bankers convene in the German spa town of Baden-Baden on March 17-18, their first meeting since Donald Trump’s U.S. election victory in November where his protectionist stance on international trade is likely to be a key issue.
Gains in mining stocks and continued corporate deal-making activity helped European shares offset weakness in oil-related shares, with the benchmark STOXX 600 up 0.2 percent in early trades.
The FTSE 100 was up slightly where along with mining blue chips a 1 percent gain for shares of HSBC supported the index.
HSBC shares rose after Europe’s biggest bank tapped an outsider, Mark Tucker, for its top job.
In bond markets, euro zone government bond yields pulled back from multi-week highs, as nervous investors turned their focus to this week’s Dutch parliamentary elections — the next key gauge of populism in Europe.