Markets retreat on back of growth concerns

US stocks dropped from a record and European shares declined as analysts brought forward estimates for the Federal Reserve to raise interest rates. Three-year Treasuries fell with commodities. The Standard and Poor’s 500 Index slipped 0.2 per cent at 10:19 a.m. in New York. The Stoxx Europe 600 Index slid 0.6 per cent after rising 1.8 per cent last week. The yield on Treasury three-year notes climbed two basis points to 0.97 per cent. Emerging-market stocks advanced as Indonesian stocks gained the most since April.

The S&P GSCI index of 24 commodities slumped 0.6 per cent, as silver lost 1 percent, copper fell 0.6 per cent and US natural gas tumbled 3.2 per cent. Goldman Sachs Group revised its forecast for the Federal Reserve to raise rates to the third quarter of 2015, rather than the first three months of 2016, saying the economy is "accelerating to an above-trend pace."

Minutes of the last US policy meeting are due this week and Alcoa is set to release earnings. American markets resume today from a three-day weekend after stronger-than-forecast employment data on July 3rd.

“Valuations are pretty stretched, and we don’t see a lot of revenue growth, which might be negative for the market,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird and Co.

“There may be some concern about earnings, but this is basically a market being driven by an improving economy and guarantees by the Federal Reserve that they’re not going to raise interest rates.”

Goldman joins companies including JPMorgan Chase and Co. and Bank of Tokyo-Mitsubishi UFJ Ltd. in moving up its Fed estimates after US data last week showed the economy added 288,000 workers in June.

In the UK, the FTSE 100 retreated from a three-week high on concerns about the pace of global economic growth, with cyclical sectors such as miners and banks worst hit. The blue-chip FTSE 100 index was down 0.5 per cent at 6,832.16 points by 1407 GMT after climbing to its highest since early June in the previous session. The index gained 1.6 per cent last week, its best weekly performance since May. Investors cut their equities trading positions after data on Monday showed German industrial output fell 1.8 per cent on the month in May, its biggest drop in more than two years.

"The market appears to be in a consolidation phase as weaker-than-expected economic numbers from Germany have raised some concerns regarding the strength and sustainability of the recovery in Europe," HSBC equity strategist Robert Parkes said. Miners featured among the top decliners, with weaker metals prices and concerns about global growth prompting investors to take some money off the table after a recent rally.

Bloomberg/Reuters