On Tuesday, world stocks were in their biggest two-day dive in six months with commodities following suit, as rising U.S. borrowing costs moved markets away from their elated start of the year. The move was higher than 2.7 percent by U.S. Treasury yields, which is the benchmark for lending rates across the globe.
Oil dropped back below $70, metals fell, and Asian stocks endured their largest decline since early December following Wall Street’s largest loss in five months over concerns regarding Apple’s latest smartphone.
The pan-regional STOXX 600 lost 0.5 percent as traders focused on cyclical sectors such as mining and financials following this month’s runs.
“The big picture view is that the rising U.S. yields have finally come to the dollar’s rescue,” said strategist Alvin Tan. “It didn’t respond for weeks but as yields have broken above 2.7 percent, it finally has.”
The bond market is preparing for hawkish language from the Federal Reserve, which began its two-day policy meeting on Tuesday.
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Attention is also on U.S. President Donald Trump’s State of the Union address scheduled later Tuesday, as people will listen in for his views on trade and an infrastructure overhaul.
The dollar rebounded which led to a declining euro. The euro shed 0.3 percent to $1.2373 after reaching last week’s three-year high of $1.2538.
Britain’s pound dropped to $1.40, as Brexit pressures continued to pester the United Kingdom’s government and leader Theresa May. Growth in consumer lending, which the Bank of England has been monitoring closely, accelerated for the first time in four months.
Russian stocks moved higher as they neglected the though off the risks of new sanctions from a new U.S. list of oligarchs close to the Kremlin.
Overnight most Asian currencies had fallen as the increase in bond yields boosted the greenback. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.1 percent but was still on course for a 6.5 percent gain for the month.
Australian stocks lost 0.9 percent, South Korea’s KOSPI lost 1 percent, Hong Kong’s Hang Seng 0.9 percent and Shanghai 0.8 percent. Japan’s Nikkei dropped 1.4 percent.
On Monday, U.S. stocks moved away from their record highs as the Dow and the S&P 500 indexes took in their largest one-day percentage decline in five months.
Oil prices fell pressured by the dollar’s rebound and the rise in U.S. crude output. U.S. crude futures dropped 0.9 percent to $64.97 per barrel after having risen to $66.66 per barrel on last week, its highest since December 2014. Brent crude fell 0.5 percent to $69.10 per barrel.