Global stocks retreated on Thursday, and Treasury yields held near the key 4% mark as investors priced the likelihood of higher interest rates and a looming US recession.
(Bloomberg) — Global stocks retreated on Thursday, and Treasury yields held near the key 4% mark as investors priced the likelihood of higher interest rates and a looming US recession.
Futures on the S&P 500 slipped 0.3% and those on the rate-sensitive Nasdaq slid 0.6%. Chipmakers Nvidia Corp and Advanced Micro Devices Inc fell about 0.7% in pre-market trading, while Tesla shed more than 2% after US regulators launched a probe over complaints about the steering wheel in some new models.
Europe’s Stoxx 600 benchmark also dropped about half a percent, with Credit Suisse Group AG a notable loser. Shares in the lender fell for the fourth day, set for the longest losing streak since Dec. 20, after it delayed the publication of its annual report and compensation details for 2022.
Investors are digesting Jerome Powell’s signaling after the Federal Reserve chief told lawmakers no decision had been made on the pace of the next move. He reiterated however, that an acceleration in tightening was still on the table, and rates may go higher than anticipated should economic data warrant.
The comments coincided with another round of US jobs figures that came in on the hot side, bolstering bets that policymakers will remain hawkish. Wagers now solidly tilt toward a half-point move in March rather than the quarter-point earlier expected.
“We have moved from a regime of hyper liquidity to a regime of lower liquidity, from low rates to higher rates and that is generally not a great time for equities, especially if the Fed is trying to cool the economy,” Marc Rowan, CEO of Apollo Global Management told Bloomberg Television.
The dollar fell slightly, staying within sight of its high for the year, while the inversion between the 2- and 10-year Treasury yields — considered a fairly reliable recession harbinger — eased slightly to about 106 basis points. The gauge had surpassed 110 basis points on Wednesday, the most in over four decades.
The next highlight for markets is Friday’s jobs report, with even just slightly stronger-than-forecast figures likely to trigger more bets for a bigger hike at the March 21-22 Fed meeting. Economists project a 225,000 increase in February payrolls, about half January’s blockbuster pace but a figure in that range would confirm the US economy continues to add jobs at a strong rate.
Earlier in the day, Asian shares edged higher, reacting to Powell’s slightly softer tone and below-forecast Chinese inflation figures that eased fears of an spike in price growth that would ripple out worldwide.
Crude prices slipped for the third day, hurt by the higher-rate expectations.
Key events this week:
- US Challenger job cuts, initial jobless claims, household change in net worth, Thursday
- Bank of Japan policy rate decision, Friday
- US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 4:39 a.m. New York time
- Nasdaq 100 futures fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index was little changed
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.5%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.0569
- The British pound rose 0.3% to $1.1884
- The Japanese yen rose 0.9% to 136.16 per dollar
- The offshore yuan was little changed at 6.9663 per dollar
Cryptocurrencies
- Bitcoin fell 1.7% to $21,636.76
- Ether fell 1.4% to $1,531.4
Bonds
- The yield on 10-year Treasuries was little changed at 3.99%
- Germany’s 10-year yield advanced four basis points to 2.68%
- Britain’s 10-year yield advanced three basis points to 3.80%
Commodities
- West Texas Intermediate crude fell 0.4% to $76.36 a barrel
- Gold futures rose 0.1% to $1,821 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Farah Elbahrawy.
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