(Bloomberg) – Stock prices tumbled with US stock futures as fears of tightening monetary policy in the US to Norway to the UK hampered the market’s uptrend.
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All industrial sub-sectors fell in Europe, where the region’s key equity indicator fell 1% and declines extended to a fourth day. Contracts for the S&P 500 and Nasdaq 100 trended after a sell-off on Wall Street on hawkish warnings from Federal Reserve Chair Jerome Powell in his testimony before Congress.
Your fight against inflation is far from over. Central banks around the world continue to hike interest rates, thwarting bets that tightening cycles are coming to an end. That has prompted investors to reassess the sentiment sparked by the Fed’s interest rate pause last week.
“The risk of a recession is arguably higher if interest rates continue to rise, but risky assets don’t reflect that,” said Janet Mui, head of market analysis at RBC Brewin Dolphin. “Markets are reassessing whether further risk-on is warranted after the year-to-date rally.”
In the US, fears of a hard landing revived on the prospect of tighter policy, pushing the inversion of a key segment of the government bond yield curve to a full percentage point for the first time since March.
Powell underscored the need to contain inflation in his mid-year report to Congress on Wednesday, saying two more rate hikes this year are “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 rein in inflation after a report showed it rose 8.7%, the fourth month higher-than-expected. Cash prices are now suggesting that the benchmark BOE will hit 6% by the end of the year, which would be its highest level since the turn of the century.
The story goes on
Norway’s central bank raised its policy rate on deposits by 50 basis points to 3.75%, the 11th increase in its policy rate since September 2021. Officials said the rate would be “most likely to be raised further in August” and later forecast a top rate of 4.25 % Year.
“We are seeing growing concerns that central banks are ignoring worries about a slowdown in economic activity and prioritizing the fight against inflation, viewing a potential recession as a necessary side effect of their willingness to bring inflation back down,” said Michael Hewson, chief markets analyst at CMC Markets UK.
In contrast, the Swiss National Bank implemented the smallest rate hike since monetary tightening began a year ago, raising its benchmark interest rate by a quarter point to 1.75%. Swiss inflation is the slowest of any advanced economy.
Important events this week:
Eurozone Consumer Confidence, Thursday
Collective bargaining decisions in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey, Thursday
US Conference Board leading index, Initial Jobless Claims, Current Account, Existing Home Sales, Thursday
The Fed’s Powell is testifying before the Senate Banking Committee on Thursday
Loretta Mester of the Cleveland Fed speaks Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
Japanese CPI, Friday
US S&P Global Manufacturing PMI, Friday
St. Louis Fed President James Bullard speaks Friday
Some of the key movements in the markets:
Shares
The Stoxx Europe 600 was down 1% at 10:30am London time
S&P 500 futures fell 0.2%
Nasdaq 100 futures down 0.3%
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index fell 0.1%
currencies
The Bloomberg Dollar Spot Index is 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
cryptocurrencies
Bitcoin rose 0.6% to $30,153.68
Ether is up 1.6% to $1,909.34
Bind
The 10-year government bond yield rose three basis points to 3.75%
The 10-year German government bond yield rose one basis point to 2.44%
The 10-year UK government bond 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 created with the support of Bloomberg Automation.
– With support from Garfield Reynolds, Ksenia Galouchko and Richard Henderson.
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