Global Stocks Steady ahead of U.S.-China Summit
European markets largely tracked Wall Street on Thursday, with prices in New York edging up at the start of the session ahead of a U.S.-China presidential summit expected to focus on trade and North Korea.
U.S. stocks were steady in early trading, recovering from a sell-off the day before spurred by Federal Reserve meeting minutes suggesting a more aggressive monetary tightening policy than the market had anticipated.
The firmer opening in New York helped put a floor under earlier losses in Europe.
Investors' eyes are now on a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping.
"Any sense that the summit is proceeding in a very amicable way could give way to a relief rally in the next few sessions," said Briefing.com analyst Patrick O'Hare.
"Conversely, less amicable-sounding communications could spark the opposite."
In Europe, stock prices recovered from their earlier losses, with stocks in London and Frankfurt trimming their losses, while Paris was in positive territory.
Nevertheless, the mood could change quickly, analysts warned.
Following the previous day's sharp losses, "European markets may be exposed to further downside shocks as anxiety ahead of the Trump-Xi summit dents risk sentiment," said FXTM analyst Lukman Otunuga.
Wednesday's sell-off had been triggered by the U.S. Federal Reserve minutes, which suggested that policymakers are considering unwinding the $4.5 trillion-worth of Treasury bills and other assets on its books.
At the moment, the Fed reinvests principal payments it receives from its bond holdings back into the market -- maintaining the size of its portfolio and the amount of money in the system.
Winding back on reinvestments would take money out of the financial system.
The Fed's reinvestment policy also helps suppress interest rates, so a reversal may signal more expensive future borrowing cots.
"This is huge news for traders in fixed interest and global markets more broadly. It means that a source of demand in U.S. fixed interest markets is going to be reduced," said Greg McKenna, chief market strategist at AxiTrader, in a note.
"Maybe not today, maybe not tomorrow but taking the Fed out of the bond market will reverberate across global financial markets," he said.
The minutes of the March meeting also showed policy board members saw "considerable uncertainty" about the effects Donald Trump's pledged tax-cut and infrastructure spending stimulus would have on the U.S. economy.
Asian stocks were hit by the Fed news, with Tokyo retreating 1.4 percent, Hong Kong down and Sydney losing 0.3 percent. However, Shanghai closed 0.3 percent higher.
- Key figures at 1415 GMT -
New York - Dow: FLAT at 20,658.88 points
London - FTSE 100: DOWN 0.4 percent at 7,305.30
Frankfurt - DAX 30: DOWN 0.1 percent at 12,203.78
Paris - CAC 40: UP 0.5 percent at 5,116.07
EURO STOXX 50: UP 0.3 percent at 3,483.55
Tokyo - Nikkei 225: DOWN 1.4 percent at 18,597.06 (close)
Hong Kong - Hang Seng: DOWN 0.5 percent at 24,273.72 (close)
Shanghai - Composite: UP 0.3 percent at 3,281.00 (close)
Euro/dollar: DOWN at $1.0657 from $1.0666
Pound/dollar: UP at $1.2482 from $1.2470
Dollar/yen: UP at 110.80 from 110.71 yen
Oil - Brent North Sea: UP 45 cents at $54.81 per barrel
Oil - West Texas Intermediate: UP 42 cents at $51.57
Source: Agence France Presse
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