World stocks and the dollar dipped on Tuesday, as investors locked in some of the sharp gains seen over the last month ahead of the Federal Reserve’s policy meeting and results from gadget giant Apple.
European shares opened down 0.5 per cent for second day running as a profit warning from the world’s largest chemicals firm, BASF, added to the cautious mood.
In Asia, a jump in the safe-haven yen sent Tokyo’s Nikkei tumbling, while China's bourses dived 2 per cent before recovering in another volatile session.
The euro remained firmly on the back foot after the European Central Bank’s chief economist said there were “no taboos’’ as the ECB seeks ways to push up inflation, though another drop in oil highlighted the challenge it faces.
“We are in a situation where the time-frame for achieving the inflation objective risks once again to be moved back,’’ the ECB's Peter Praet said.
“The Governing Council has given a very strong message: it is ready to draw the consequences of its assessment of the monetary policy stance.’’
But the most pressing topic for traders was the message that will come out of a two-day meeting of the Federal Reserve which starts later. Markets are pricing in only around a 7 per cent chance the U.S. central bank will hike rates this week, but will be watching be for clues to whether “lift-off’’ could come at its next meeting in December.
After rising 3 per cent over the last two weeks despite diminishing expectations of a rate hike in 2015, the dollar tracked world shares lower to fall for a second day against the other main global currencies.
HSBC currency strategist Dominic Bunning said markets were in a holding pattern ahead of the Fed and Friday's Bank of Japan meeting, which could bring more stimulus, and that the current risk-off mood would unlikely to last.
“Classic risk assets are all slightly softer but it’s not been an aggressive move,’’ he said. “I don’t think the positioning is there to see these massive spikes in emerging market selling and related safe-haven strength,’’ he added.
The euro fell 0.6 per cent to 133.03 yen, its weakest since early September. The dollar also fell 0.6 percent to 120.43 yen, having hit 121.60 on Friday.
Apple eyed
Apple will announce results later, with investors anxious to hear how many new phones it has been selling and its assessment of the world economy given the breadth of demand for its technology products.
The world’s largest chemical firm, BASF, whose products range from car coatings to mining acids, blamed the pressures facing major emerging markets like China and Brazil for the profit warning that knocked its shares 3 per cent lower.
“We experienced a pronounced summer lull and no volume momentum in September. Major markets like Brazil are in a recession, or face lower growth rates, such as China,’’ Chief Executive Kurt Bock said.
MSCI’s main emerging markets stock index was on course for its fifth fall in six days.
Russian Finance Minister Anton Siluanov meanwhile said he saw risks the country’s Reserve Fund would be exhausted by the end of next year if oil prices stay at their current level.
Commodity markets continue to be dogged by concerns over plentiful supplies and weak demand, with oil prices extending losses into a third week. US crude was down 1 percent at $43.45 a barrel, while Brent fell as low $47.17 a barrel before a minor rebound in early European trading.
Metals had more shine. Three-month copper was up a touch at $5,226 a tonne, while gold climbed to $1,164.31 an ounce after three days of falls.