Stocks Fall as Hawkish Central Banks Sap Spirits: Markets Wrap

(Bloomberg) — Stocks fell with U.S. stock futures as fears of tighter policies from the U.S. to Norway to Britain stymied the market’s bull run.

Most read from Bloomberg

All industrial subsectors were in the red in Europe, with the region’s main stock gauge falling 1%, extending declines to a fourth day. Contracts for the S&P 500 and Nasdaq 100 pointed lower after a sell-off on Wall Street on hawkish warnings from Federal Reserve Chairman Jerome Powell in testimony before Congress.

The fight against inflation is far from over, central banks all over the world are carrying out several interest rate increases and preventing bets that the tightening cycles would slow down. That has investors reconsidering the animal spirits unleashed by last week̵[ads1]7;s Fed rate cut.

“Recession risk is arguably higher if prices are higher for a longer period of time, but risk assets don’t reflect that,” said Janet Mui, head of market research at RBC Brewin Dolphin. “Markets are reassessing whether further risk-taking is justified after the rally so far this year.”

In the US, fears of a hard landing reasserted themselves amid the prospect of policy tightening, pushing the inversion of a key segment of the government yield curve to a full percentage point for the first time since March.

Powell stressed the need to tame inflation during his semiannual report to Congress on Wednesday, saying two more rate hikes this year were “a pretty good guess.” His warning preceded Thursday’s political meetings in England, Switzerland, Norway and Turkey.

The Bank of England is under pressure to contain inflation after a report showed it rose 8.7%, higher than expected for a fourth month. Money market prices now suggest that the BOE’s benchmark index will reach 6% by the end of the year, which would be the highest since the turn of the century.

Norway’s central bank raised the key rate by 50 basis points to 3.75%, the 11th increase in the benchmark since September 2021. Officials said the rate “will most likely be raised further in August” and predicted a peak rate of 4.25% after that. year.

“We see growing concerns that central banks will look past concerns about a slowdown in economic activity and prioritize the fight against inflation, treating a possible recession as a necessary side effect of their desire to push inflation back down,” said Michael Hewson, market analyst at CMC Markets UK.

In contrast, the Swiss National Bank delivered the smallest rate hike since it began tightening monetary policy a year ago, lifting its key rate by a quarter of a point to 1.75%. Swiss inflation is the slowest of any advanced economy.

Important events this week:

  • Consumer confidence in the eurozone, Thursday

  • Consider decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday

  • US Conference Board leading index, initial jobless claims, checking account, existing home sales, Thursday

  • The Fed’s Powell testifies before the Senate Banking Committee on Thursday

  • Cleveland Fed’s Loretta Mester speaks Thursday

  • Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday

  • Japan CPI, Friday

  • US S&P Global Manufacturing PMI, Friday

  • St. Louis Fed President James Bullard speaks Friday

Some of the main features of markets:


  • The Stoxx Europe 600 was down 1% as of 10:30 a.m. London time

  • S&P 500 futures fell 0.2 percent

  • Nasdaq 100 futures fell 0.3 percent

  • Futures on the Dow Jones Industrial Average fell 0.2 percent

  • The MSCI Asia Pacific index fell 0.2 percent

  • MSCI Emerging Markets index fell 0.1%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.1% to $1.0998

  • The Japanese yen was little changed at 141.91 per dollar

  • The offshore yuan was little changed at 7.1812 per dollar

  • The British pound was little changed at $1.2776


  • Bitcoin rose 0.6% to $30,153.68

  • Ether rose 1.6% to $1,909.34


  • The yield on 10-year government bonds rose three basis points to 3.75%

  • Germany’s 10-year yield rose one basis point to 2.44%

  • UK 10-year yield rose one basis point to 4.42%

Raw materials

  • Brent crude fell 1.1% to $76.27 a barrel

  • Spot gold fell 0.2% to $1,928.39 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Garfield Reynolds, Ksenia Galouchko and Richard Henderson.

Most read from Bloomberg Businessweek

©2023 Bloomberg LP

Source link

Back to top button

mahjong slot