Global stocks slide on rate hike talk, German data; euro off

Fri Sep 9, 2016 5:06pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - Stocks across the globe fell the most since June on Friday, dragged lower by expectations that the Federal Reserve could be closer to an interest rate hike, which in turn boosted the U.S. dollar and weighed on commodities.

Geopolitical jitters added to the sour mix after North Korea conducted its fifth and biggest nuclear test and said it had mastered the ability to mount a warhead on a ballistic missile, ratcheting up a threat that its rivals and the United Nations have been powerless to contain.

German exports fell sharply in July, shrinking the overall trade surplus for the fourth consecutive month - something not seen since 1992 in the euro zone's largest economy.

The euro peaked for the day shortly after the German data and later dipped below $1.12 EUR=, while the benchmark U.S. Treasury yield US10YT=RR touched its highest in 11 weeks.

Stocks on Wall Street were hit after Boston Fed President Eric Rosengren said "risks to the forecast are becoming increasingly two-sided," meaning that while a slowdown overseas remains a concern, the U.S. economy has proved resilient and could even overheat if Fed policy remains unchanged for too much longer.

"This is more about central banks than anything else; there’s a rising expectation of inflation as well as what seems to be a modest shift within central banks for a little bit steeper yield curve," said Jason Pride, director of investment strategy at Glenmede in Philadelphia.

The hawkish Fed tone was softened by Federal Reserve Governor Daniel Tarullo, who said he wants to see more evidence of a sustained uptick in inflation before raising rates.

The Dow Jones industrial average .DJI fell 394.46 points, or 2.13 percent, to 18,085.45, the S&P 500 .SPX lost 53.49 points, or 2.45 percent, to 2,127.81 and the Nasdaq Composite .IXIC dropped 133.58 points, or 2.54 percent, to 5,125.91.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, New York, U.S., September 9, 2016. REUTERS/Brendan McDermid