US stocks fell on Tuesday as traders awaited crucial data on US inflation, while a sharp sell-off in Sweden’s real estate sector overshadowed markets in Europe.
Wall Street’s benchmark S&P 500 was down 0.5 per cent, while the tech-heavy Nasdaq Composite fell 0.7 per cent.
In Europe, the region-wide Stoxx 600 was down 0.3 per cent as investors grew nervous for the outlook for real estate companies following a year of aggressive interest rate rises.
The Stoxx Europe 600 real estate sector lost 2.9 per cent after Swedish landlord SBB said on Monday that it would halt dividend payments and scrap a planned rights issue, to preserve capital.
Its shares fell by a quarter after falling by 20 per cent on Monday after credit rating agency S&P cut the company’s credit rating to junk. Swedish rivals fell in Stockholm trading, Sagax by 1.3 per cent and Fastighets AB Balder by 6.8 per cent.
The real estate sector shakeout was led by “the view that weakness in Sweden’s property sector is foreshadowing what is set to come in mainland Europe”, said Simon Harvey, head of FX analysis at Monex Europe.
In the US, traders wait for the Bureau of Labor Statistics to release its latest indicator of US inflation on Wednesday. The report is expected to show headline consumer price inflation at an annual rate of 5 per cent in April, unchanged from the previous month, according to economists surveyed by Bloomberg.
This is likely to influence the US Federal Reserve’s path for monetary policy after it raised interest rates last week to a range of 5 per cent to 5.25 per cent, marking the 10th increase in 14 months.
US regional bank stocks continued their decline in the wake of First Republic’s collapse at the start of this month, and lingering worries over the health of the industry. PacWest shares lost 4.5 per cent, reversing a 3.6 per cent rise in the previous session, while Western Alliance shed 4 per cent.
“Uncertainty in the banking sector continues to tighten credit conditions and lending standards [which] could potentially push inflation much closer to target by December as unemployment rises,” said Jamie Dutta, market analyst at Vantage.
The Fed’s quarterly survey of senior loan officers showed on Monday that US banks planned to raise their lending standards, adding to fears about a looming credit crunch for the world’s largest economy.
US government bond prices fell, with the yield on interest rate-sensitive two-year Treasuries up 0.03 percentage points to 4.04 per cent, following a sell-off on Friday. Yields move inversely to prices.
The US dollar index rose 0.3 per cent against a basket of six other currencies.
Brent crude, the international oil benchmark, fell 1.4 per cent to $75.88 a barrel.
London’s FTSE 100 fell 0.2 per cent as traders awaited the Bank of England’s next policy meeting on Thursday when the central bank is expected to raise interest rates by 0.25 percentage points to 4.5 per cent, their highest level since 2008.
Hong Kong’s benchmark Hang Seng index fell 2.1 per cent, while China’s CSI 300 was down 0.9 per cent. Japan’s Topix stood out from the rest of the region, rising 1.3 per cent.
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