European stocks dipped lower at the start of trading Wednesday, while U.S. equity futures suggested a similarly weak open on Wall Street as investors continue to eye developments in the bond market ahead of the release or minutes from the Federal Reserve's January meeting that could provide the first specific detail on interest rate hikes under new chairman Jerome Powell.
The Stoxx Europe 600, the region's broadest measure of share prices, fell 0.6% by mid-day in Frankfurt as investors digested some weaker-than-expected manufacturing sector data from France and Germany and a series of less-than-stellar corporate earnings from European bluechips. Britain's FTSE 100 slipped 0.28% after the opening bell, although strong gains for Lloyds Banking Group plc (LYG) and HSBC plc (HSBC) helped limit the downside.
Early indications from Wall Street futures suggest stocks may struggle again today, following last night's near 300-point decline for the Dow Jones Industrial Average, with contracts tied to the average priced 43 points to the downside and those linked to the broader S&P 500 seen 3.5 points, or 0.11%, into the red.
The Fed minutes, which will detail the central bank's two-day meeting that ended on Jan. 31, come amid one of the busiest three-day stretches in U.S. bond market history, with the Treasury planning to raise just under $260 billion in a series of auctions designed to fund a portion of the nation's surging deficit, which Goldman Sachs analysts suggest could hit 5.2% of GDP by 2019.
���� MARKET #FED PRICING RESTORED ����— Danske Bank Research (@Danske_Research) February 21, 2018
Ahead of tonight's #FOMC minutes it's worth noting that the initial repricing of #US monetary policy following the sell-off in global risk has now been fully reversed. Markets price roughly 4.2 interest rate hikes for 2018 and 2019 together. pic.twitter.com/DymeqPSFzg
The massive wave of supply -- the second-largest three-day sale on record -- have pushed 2-year note yields to a 2008 high of 2.28% and lifted benchmark 10-year yields to 2.26% during overnight Asia trading.
That's helped lift the U.S. dollar, also, from its recent doldrums, with the dollar index, a measure of the greenback's strength against a basket of six global currencies, rising 0.2% to 89.90 by the start of European trading.
The dollar's recent surge -- it's up more than 1.8 since hitting a three-year low last week -- once again had a heavy influence on trading in Asia, pushing oil prices lower and disrupting pricing in regional stocks. That said, the regional MSCI Asia ex-Japan benchmark rose 0.79% into the close of the session while Japan's Nikkei 225 managed to eek out a modest 0.21% gain to end the day at 21,970.81 points.
Global crude prices were nursing dollar-related losses in early European trading as the dollar helped hold down crude gains as traders await U.S. inventory data from the American Petroleum Institute later today and official figures -- one day late, owing to Monday's Presidents' Day holiday -- from the Energy Information Administration on Thursday.
Brent futures contracts for April delivery were seen 0.65% lower at $64.88 per barrel while WTI contacts for the same month, the benchmark for U.S. prices, were marked 1.08% to the downside at $61.20 per barrel.