Stocks Slide Amid Worries Over Inflation, Growth: Markets Wrap

Stocks and US index futures dropped as hawkish messages from the New Zealand and Australian central banks signaled a prolonged fight against inflation and revived concerns about an economic slowdown.

(Bloomberg) — Stocks and US index futures dropped as hawkish messages from the New Zealand and Australian central banks signaled a prolonged fight against inflation and revived concerns about an economic slowdown.

Contracts on the S&P 500 Index slipped 0.2% and Europe’s Stoxx 600 declined for a third day. Gold traded near a 13-month high, while Treasury yields rose.

Nvidia Corp. slid 1.6% in US premarket trading as traders weighed Japan’s decision to join a US alliance to restrict chip-making exports to China. Sodexo SA, a provider of catering services, jumped 11% in Paris after announcing plans to spin off its benefits and rewards business. 

The Reserve Bank of New Zealand surprised markets with a half-point interest rate hike, twice as much as forecast. Governor Adrian Orr said inflation is too high and that expectations for price increases may also remain elevated despite a weaker economy. 

Meanwhile, Reserve Bank of Australia Governor Philip Lowe pushed back against bets its tightening cycle is ending, saying policymakers still expect a need for higher rates. 

“The battle against inflation looks far from won,” said Ivailo Vesselinov, chief strategist at Emso Asset Management Ltd. in London. “Notwithstanding the latest signs of softening economic activity, should disinflation hit a wall later this year, major central banks would struggle to validate the current market pricing for rate cuts.”

Markets in China, Hong Kong and Taiwan were shut for a holiday. The MSCI Asia Pacific Index dropped 0.6%, with Toyota Motor Corp. and Daiichi Sankyo Co. contributing the most to its losses.  

Meanwhile, the two-year Treasury yield rose 5 basis points to 1.2%, after a 14 basis point drop yesterday. Swap contracts downgraded the odds of a quarter-point rate hike at the Fed’s May meeting to around 50%, compared with a peak of 70% on Tuesday.

“It’s a lot easier for central banks to clean up after a hawkish error than it is to try and correct a dovish error,” James Athey, investment director at Abrdn, said on Bloomberg TV. “If you allow inflation and inflation expectations to become unanchored, that’s an incredibly difficult and painful issue to deal with. If you hike too much in hindsight, then you’ve created a recession that was probably going to be the end result anyway and you can cut rates quickly to deal with that.”

Key events this week:

  • Eurozone S&P Global Eurozone Services PMI, Wednesday
  • US ADP employment change, Wednesday
  • US trade, Wednesday
  • US initial jobless claims, Thursday
  • St. Louis Fed President James Bullard speaks, Thursday
  • US unemployment, nonfarm payrolls, Friday
  • Good Friday. US stock markets closed, bond markets close for part of the day

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.2% as of 11:30 a.m. London time
  • S&P 500 futures fell 0.2%
  • Nasdaq 100 futures fell 0.2%
  • Futures on the Dow Jones Industrial Average fell 0.1%
  • The MSCI Asia Pacific Index fell 0.6%
  • The MSCI Emerging Markets Index rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was little changed at $1.0949
  • The Japanese yen was unchanged at 131.71 per dollar
  • The offshore yuan was little changed at 6.8814 per dollar
  • The British pound fell 0.2% to $1.2475

Cryptocurrencies

  • Bitcoin rose 0.9% to $28,506.16
  • Ether rose 1.7% to $1,909.66

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 3.36%
  • Germany’s 10-year yield advanced four basis points to 2.29%
  • Britain’s 10-year yield advanced six basis points to 3.50%

Commodities

  • Brent crude fell 0.3% to $84.72 a barrel
  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Alice Atkins and Tassia Sipahutar.

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