Global stocks dip ahead of Fed meeting; oil drops on glut
By Herbert Lash
NEW YORK (Reuters) - Global equity markets edged lower on Monday as a 2 percent drop in crude prices weighed on investor sentiment and traders awaited signals of a potential interest rate increase this year from this week's meeting of U.S. Federal Reserve policymakers.
Oil prices fell to two-and-a-half month lows amid worries that a global glut of crude and refined products would weigh on markets for some time.
Shares in Europe closed slightly higher but a gauge of equity markets worldwide was lower. Longer-dated Treasury yields fell and the dollar was slightly lower against the euro and yen as investors looked to the conclusion of a two-day Fed policy meeting on Wednesday and a Bank of Japan meeting on Friday.
"With stocks starting to fall, we are looking at some upward momentum on longer-dated bond prices," said Justin Hoogendoorn, head of fixed income strategy at Piper Jaffray in Chicago.
Traders have priced in a 26 percent chance of a rate hike in September and a 56 percent chance in December, according to CME Group's FedWatch tool.
MSCI's all-country world stock index .MIWD00000PUS fell 0.12 percent, but the pan-European FTSEurofirst 300 .FTEU3 of leading regional stocks closed up 0.06 percent to 1,344.95.
The Dow Jones industrial average .DJI closed down 77.79 points, or 0.42 percent, to 18,493.06. The S&P 500 .SPX slid 6.55 points, or 0.3 percent, to 2,168.48 and the Nasdaq Composite .IXIC lost 2.53 points, or 0.05 percent, to 5,097.63.
Phil Orlando, chief equity strategist at Federated Investors in New York, said that from a valuation perspective, U.S. stocks were rich, with the benchmark S&P 500 trading at 22 times trailing earnings. The market is set for a correction, he said. Continued...