All three major US indices ended the day lower, with investors wondering whether strong consumer activity amid rising inflation could prompt the Fed to ease its stimulus measures faster than previously thought.
The Dow Jones Industrial Average fell 0.58%, the S&P 500 lost 0.26%, and the Nasdaq Composite fell 0.33%.
The MSCI World Stock Index, which tracks stocks from 45 countries, fell 0.29%.
Soaring gasoline prices in Europe compounded inflation fears, but strong earnings reports helped German DAX, French CAC 40 and pan-European STOXX 600 to new closing highs.
The dollar eased from a new 16-month high, while the euro remained a bit weak as investors weighed the odds of a central bank tightening, which could slow growth, in a context of increasing pressure on prices.
Fears that the Fed is mismanaging inflation are overblown, as the US central bank has made it clear how it would reduce its bond purchases without destabilizing the market, said David Bahnsen, chief investment officer of wealth manager The Bahnsen Group. in Newport Beach, California.
“I just don’t think the market is ultimately expecting a policy error that drives out some of the liquidity that has helped these markets,” Bahnsen said.
The dollar index, which tracks the greenback against a basket of six currencies, was down 0.15% to 95.795.
The euro eased 0.05% to $ 1.1313, while the yen lost 0.62% to $ 114.1100.
Investors believe that higher inflation could prompt the Fed to accelerate the reduction of its asset purchase program.
The Fed began phasing out bond purchases this month and plans to end them completely by mid-2022.
Inflation concerns have pushed investors into safe haven gold. US gold futures were up 0.9% to $ 1,870.20 an ounce.
$ 1 TILLION ENTRY
Global stocks have registered entries of around $ 1 trillion in the past 51 weeks as positive news on coronavirus vaccines emerged, Goldman Sachs said in a note, adding that this year has already seen four times the entries of the best previous year.
Oil prices collapsed after the Organization of the Petroleum Exporting Countries and the International Energy Agency warned of impending oversupply and the rise in COVID-19 cases in Europe escalated downside risks to the recovery in demand.
The two major benchmarks for crude fell to their lowest closing levels since early October.
Brent crude fell $ 2.15 to $ 80.28 a barrel. US crude came in at $ 2.40 to $ 78.36 per barrel.
US Treasuries rallied as a recent backing in yields reached levels that attracted buyers to securities and after the Treasury sold 20-year bonds at lukewarm, but not so great demand.
Benchmark 10-year yields hit 1.65%, the highest since October 26, before falling back to 1.59%. They fell from a low of 1.42% last week, before data showed US consumer prices posted their biggest increase in 31 years in October.
(Reporting by Herbert Lash, additional reporting by Tom Wilson in London, Alun John in Hong Kong and Pete Schroeder in Washington; Editing by Gareth Jones and Alistair Bell)