Market update: What a difference a day makes —equities retreat on Fed comments – 23.05.2013

Source: Henderson Global Investors

US shares endured a volatile session on Wednesday. Having rallied earlier in the day, stocks fell as the minutes of the latest Federal Reserve (Fed) meeting and comments by the Fed chairman raised concerns that the central bank may soon scale back its stimulus efforts. All 10 sectors of the S&P 500 fell, with the index closing down 0.8% while the Dow Jones shed 0.5%. The hawkish interpretation of the Fed news generated a risk-off mood, which benefited safe haven assets. The price of 10-year US Treasuries rose (yields fell), gold was back in demand and the dollar index was up.

Mimicking the risk-off sentiment in the US, Asian equities retreated in overnight trading with most bourses closing down. Markets were further pressured by the release of the latest flash manufacturing activity data in China, which contracted for the first time in seven months, fuelling concerns for the slowing Chinese economy. Japanese shares declined the most with the Nikkei 225 down 7.3%. European bourses are also down this morning (FTSE Eurofirst 300 and FTSE 100 both down 1.6% at the time of writing) as investors also focus on manufacturing and services data releases for the euro area. Metal prices are also falling with copper down the most in three weeks on the prospects of lower Chinese demand.