Stocks fall as Fed sees overvaluation in some markets, BoJ leaves policy unchanged

Stocks were mostly lower on Tuesday, the S&P 500 falling 0.2 percent and the STOXX Europe 600 falling 0.4 percent.

Investor sentiment was not exactly boosted by remarks by Federal Reserve Chair Janet Yellen on Tuesday. In her testimony to the Senate Banking Committee, Yellen reiterated the view that “a high degree of monetary policy accommodation remains appropriate”.

However, while she said that real estate, equity, and corporate-bond valuations “remain generally in line with historical norms”, she added that in the lower-rated corporate debt market, “valuations appear stretched”, while the Fed's Monetary Policy Report accompanying her testimony noted that valuations for smaller companies in social-media and biotech industries appear “substantially stretched”.

US economic data on Tuesday were mostly positive though.

US retail sales rose 0.2 percent in June. Sales were dragged down by an unexpected 0.3 percent decline in auto sales.

Excluding autos, retail sales rose 0.4 percent.

Elsewhere, the Bank of Japan left monetary policy unchanged after its meeting on Tuesday.

In China, a report on Tuesday showed that bank lending rose to 1.08 trillion yuan in June from 870.8 billion yuan in May. Total social financing rose to 1.97 trillion yuan from 1.4 trillion yuan. M2 money supply rose 14.7 percent in June from the previous year after rising 13.4 percent in May.

In the UK, a report on Tuesday showed that consumer prices rose 1.9 percent in June from the previous year, well up from 1.5 percent in May.