US stocks fell on Friday and the dollar finished its worst week in almost four years against the yen as investors worried that major central banks may soon start withdrawing stimulus and after data showed a decline in US consumer sentiment.
But European shares ended higher, supported by signs of merger and acquisition activity in the region. That helped boost the MSCI world index 0,1% on the day. The index, however, fell for a fourth straight week.
Jitters over the longevity of monetary policy around the world have roiled markets recently, and nerves were stretched further this week when the Bank of Japan decided to hold policy steady.
The concerns have fueled a selloff in global equities, emerging markets, risky bonds and commodities, which have been buoyed by central bank liquidity, while driving the safe-haven yen sharply higher.
Wall Street stocks closed their third negative week in four as investors took profits after the S&P 500 recorded its second best day of the year on Thursday. Stocks rallied more than 1% in the previous session on stronger US economic data.
The market is “giving back some of those gains from yesterday, which I think really caught people by surprise . . . and I certainly think the economic news wasn’t bullish,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
“We go through these ups and downs,” he said. “I would still say this market is certainly driven by central banker thoughts and currency markets like the Japanese yen.”
The Dow Jones industrial average ended down 105,90 points, or 0,70%, to 15,070,18. The Standard & Poor’s 500 Index fell 9,63 points, or 0,59%, to 1,626,73. The Nasdaq Composite Index lost 21,81 points, or 0,63%, to 3,423,56.
Attention is shifting to a policy meeting of the Federal Reserve next week, which would shed light on when the US central bank plans to scale back its monthly $85 billion bond purchase programme.
“Markets are looking at next week’s Fed meeting to be the big driver in the short-term,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Fed chief Ben “Bernanke has really increased the amount of transparency in the Fed’s thinking,” said Forrest. “This isn’t going to be a jack-in-the-box surprise Fed; it’s going to be a Fed that clearly indicates what it’s going to do. That’s why people are looking to this meeting in particular.”
US data on Friday showed consumer sentiment edged off a six-year high in June while manufacturing output picked up a bit last month, suggesting the economy remained on a moderate growth path. Other data showed wholesale prices rose more than expected in May but underlying inflation pressures remained muted.
Top European stocks .FTEU3 climbed 0,2%, tracking a rebound in Japanese and Asian shares. Emerging market equities as measured by MSCI rose 1,1% on Friday, although they posted a fifth consecutive week of losses.