Stocks slumped with US equity futures as central bank decisions from the UK to Norway and Switzerland are seen hobbling the market’s bull run.
(Bloomberg) — Stocks slumped with US equity futures as central bank decisions from the UK to Norway and Switzerland are seen hobbling the market’s bull run.
All industry subsectors fell into the red in Europe, where the region’s main equity gauge fell almost 1% in Europe, extending declines to a fourth day. Contracts for the S&P 500 and Nasdaq 100 pointed lower following a selloff on Wall Street on hawkish warnings by Federal Reserve Chair Jerome Powell in testimony to Congress.
Their battle with inflation far from over, central banks across the world are thwarting bets that tightening cycles were set to wind down. That’s prompted investors to rethink animal spirits unleashed by last week’s Fed rate pause.
“We’re seeing increasing worries that central banks will look through concerns over a slowdown in economic activity and prioritise the battle against inflation, treating a possible recession as a necessary side-effect of their willingness to push inflation back down,” said Michael Hewson, chief market analyst at CMC Markets UK.
In the US, hard-landing fears re-established themselves amid the prospect of tighter policy, pushing the inversion of a key segment of the Treasury yield curve to a full percentage point for the first time since March.
Powell underscored the need to tame inflation during his semi-annual report to Congress Wednesday, saying two more rate hikes this year was “a pretty good guess.” His warning preceded Thursday’s policy meetings in England, Switzerland, Norway and Turkey.
The Bank of England is under pressure to contain inflation after a report showed it rose by 8.7%, higher than expected for a fourth month. Money market pricing now implies the BOE’s benchmark will reach 6% by the end of the year, which would be the highest since the turn of the century.
Norway’s central bank lifted its key deposit rate by 50 basis points to 3.75%, the 11th hike in its benchmark since September 2021. Officials said the rate will “most likely be raised further in August” and forecast a peak rate of 4.25% later this year.
Key events this week:
- Eurozone consumer confidence, Thursday
- Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
- US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
- Fed’s Powell delivers testimony before the Senate Banking Committee, 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 moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.9% as of 9:38 a.m. London time
- S&P 500 futures fell 0.2%
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index fell 0.1%
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0992
- The Japanese yen was little changed at 141.96 per dollar
- The offshore yuan was little changed at 7.1807 per dollar
- The British pound was little changed at $1.2771
Cryptocurrencies
- Bitcoin rose 0.3% to $30,065.89
- Ether rose 1.4% to $1,905.96
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.75%
- Germany’s 10-year yield advanced two basis points to 2.45%
- Britain’s 10-year yield advanced two basis points to 4.42%
Commodities
- Brent crude fell 0.3% to $76.92 a barrel
- Spot gold fell 0.3% to $1,926.61 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Garfield Reynolds, Ksenia Galouchko and Richard Henderson.
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