US and European stocks tumbled Thursday amid unease over hawkish commentary from central banks, while the euro rose to its highest level in more than a year against the dollar.
The single currency powered to a 13-month high, building on Wednesday’s 12-month peak after European Central Bank boss Mario Draghi offered a more positive economic outlook for the eurozone than expected. Traders brushed off later attempts by other central bankers to play down his remarks.
Sterling also gained after Bank of England chief Mark Carney hinted at a rate hike, taking dealers by surprise and distracting them from British political uncertainty caused by the recent UK general election and Brexit.
“The pound and euro’s central bank-driven gains remained the focus of trading this Thursday,” said Connor Campbell, an analyst at Spreadex.
But the more aggressive tone from central bankers made for a bruising day in leading equity markets.
Paris and Frankfurt both ended the day more than 1.8 percent lower.
Wall Street stocks also were also firmly in retreat, with the S&P 500 losing 0.9 percent following another ugly day for Apple, Facebook and other large technology shares in a move analysts attributed to profit taking and portfolio rebalancing near the end of the second quarter.
“The valuation is the deepest concern and this is a long time that we have not had a sharp correction,” said Hugh Johnson of Hugh Johnson Advisors.
The pullback also comes amid dimming optimism that President Donald Trump will be able to push through major growth programs, including infrastructure spending and tax cuts.
“Relying on the long-standing truth that campaign promises aren’t — and often never become — government policy, we largely discounted last autumn’s rhetoric in our December forecast for US economic growth,” said Beth Ann Bovino, S&P Global’s US chief economist.
“Now, we no longer believe the federal government will be able to push through even a small infrastructure-spending package, and we expect only moderate tax cuts to be passed early next year as midterm elections approach.”
While most sectors were in retreat, large banks benefited after announcing a spate of share buybacks and dividend hikes after passing Federal Reserve stress tests. Bank of America, Citigroup and Wells Fargo all gained more than 1.8 percent.
BP dropped 1.1 percent after the company reported a $750-million write-off on Angola assets for the company’s second quarter.
Euro/dollar: UP at $1.1441 from $1.1376 at 2100 GMT Wednesday
Dollar/yen: DOWN at 112.11 yen from 112.32 yen
Pound/dollar: UP at $1.3009 from $1.2926
New York – Dow: DOWN 0.8 percent at 21,287.03 (close)
New York – S&P 500: DOWN 0.9 percent at 2,419.70 (close)
New York – Nasdaq: DOWN 1.4 percent at 6,144.35 (close)
Oil – Brent North Sea: UP 11 cents at $47.42 per barrel
Oil – West Texas Intermediate: UP 19 cents at $44.93 per barrel
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