Bond market lackluster activities affected global stocks on Friday, February 24, pulling European indexes lower for a third straight session, and the dollar was poised for a weekly loss as “Trumpflation” trades lost momentum.
World stocks have hit record highs, emerging markets have regained favor and the dollar has climbed to a 14-year peak in recent weeks on expectations U.S. President Donald Trump’s economic agenda will stoke growth and inflation.
New U.S. Treasury Secretary Steven Mnuchin took the edge off those expectations in his first televised interviews since he took office last week, when he said any policy steps by the Trump administration would probably have only a limited impact this year.
That knocked the dollar back, leaving it to trade down on the week and facing its first weekly loss in three. It was last down 0.2 percent against a basket of other major currencies at 100.82, Reuters reports.
Subdued forecasts from European blue chips, including BASF and Vivendi, and a drop in mining shares following overnight declines in metals prices dragged the benchmark STOXX 600 index down 1 percent.
French stocks had remained largely unscathed, rising to levels last seen in December 2015. But the CAC 40 share index fell 1.5 percent on Friday, on track for its worst day in nearly five months, a sign that stock investors are catching up to bond market weakness.
French equities are “too relaxed”, UBS warned on Friday noting that the gap between the CAC40 and government bond spread was its widest since 2012, suggesting equity investors were turning a blind eye to the selloff in bonds.
In commodity markets, London copper prices recovered as doubt about Chinese demand returned. Three-month copper on the London Metal Exchange was up 0.8 percent at $5,907 a tonne after falling 3 percent the day before.
