Stock markets slid Thursday after a sobering Federal Reserve assessment of the US economic outlook and as stimulus talks remained deadlocked.
The dollar steadied, while oil prices dropped after OPEC ministers stuck to an agreement to lower oil production.
“The fallout from the Fed minutes continues across markets, with European indices in the red and US futures pointing to a weaker open after days of gains,” noted Chris Beauchamp, chief market analyst at IG trading group.
With the coronavirus continuing to ravage the country and containment measures keeping businesses closed, minutes from the Fed’s July meeting showed it was concerned about the recovery as help for small businesses, extra money for the jobless and direct payments to all Americans come to an end.
Bank boss Jerome Powell has led repeated calls for more government support for the economy.
The “minutes are casting a shadow over markets and underline that any recovery is not going to be a straight line of advances”, said Neil Wilson of Markets.com.
“The Fed layered on the risks and caution thick, but didn’t come up with any sweeteners for the market in the shape of more easing.”
The focus is now on US jobless claims due out later Thursday for an up-to-date snapshot of the economy.
World equities have surged from a March bottom thanks to a wall of cash support from the Fed and other central banks, but with the multi-trillion-dollar fiscal rescue hammered out earlier this year now running out, US lawmakers are under pressure to stump up more.
While Democrats and Republicans dig their heels in on a new package, the chances of anything coming soon are slim.
Adding to the downward pressure were ever-present China-US tensions, with the White House withdrawing from three bilateral deals with Hong Kong on extradition and taxation over the city’s controversial new security law.
The move comes after the US revoked Hong Kong’s preferential trade status and is the latest blow in an increasingly fractious relationship between the superpowers that has fanned concerns about their crucial trade pact signed in January.
Still, there was some joy after Beijing said it would hold telephone talks with Washington on that agreement, after a planned high-level call was postponed last weekend.
US President Donald Trump said earlier this week that he had called the discussions off, adding he “didn’t want to talk to China right now”.
London – FTSE 100: DOWN 1.2 percent at 6,041.82 points
Frankfurt – DAX 30: DOWN 0.9 percent at 12,863.68
Paris – CAC 40: DOWN 1.1 percent at 4,924.51
EURO STOXX 50: DOWN 1.0 percent at 3,284.61
Tokyo – Nikkei 225: DOWN 1.0 percent at 22,880.62 (close)
Hong Kong – Hang Seng: DOWN 1.5 percent at 24,791.39 (close)
Shanghai – Composite: DOWN 1.3 percent at 3.363.90 (close)
New York – Dow: DOWN 0.3 percent at 27,692.88 (close Wednesday)
Euro/dollar: DOWN at $1.1840 from $1.1841 at 2100 GMT
Dollar/yen: DOWN at 105.98 yen from 106.12 yen
Pound/dollar: UP at $1.3124 from $1.3093
Euro/pound: DOWN at 90.21 pence from 90.40 pence
West Texas Intermediate: DOWN 1.1 percent at $42.44 per barrel
Brent North Sea crude: DOWN 1.1 percent at $44.88 per barrel