Stocks decline after some profit-taking

Equities across the globe took a hit on Tuesday, and the main indices were down 1-2% ahead of the US session as traders took some profits from the recent euphoric rally. 

As Bloomberg notes, “after a record-breaking rally that added $21 trillion to global stock markets, valuations look now stretched, and technical indicators suggest a pullback is overdue. The World Bank warned the economy would contract the most since World War II this year, reducing incomes and sending millions of people into poverty in emerging and developing nations.”

In the FX land, the Bloomberg Dollar Spot Index ended its longest losing streak since 2011 as the greenback rose against most Group-of-10 peers. The EURUSD pair slipped below the 1.13 threshold, while commodity-linked currencies also gave up some of their recent gains.

Earlier in the day, data showed that the eurozone’s GDP contracted by 3.6% year-on-year in the first quarter, while the quarterly change came out at -3.6%. Both numbers were slightly above analysts’ expectations. 

June’s FOMC meeting starts today, and it concludes tomorrow, with investors hoping the Fed won’t change its dovish stance. The Fed appears to be the only primary driver behind the recent massive rally in equities.