European equity futures fell ahead of interest rate decisions on the continent and in the UK, extending a decline in Asian and US markets after the Federal Reserve indicated it would hike rates higher than anticipated next year.
(Bloomberg) — European equity futures fell ahead of interest rate decisions on the continent and in the UK, extending a decline in Asian and US markets after the Federal Reserve indicated it would hike rates higher than anticipated next year.
The dollar climbed and the yuan fell as poor Chinese economic data added to downbeat sentiment in markets. While authorities have ended the Covid Zero policy that drove the weakness in China, the country is now struggling with a surge of infections.
Benchmark indexes in Japan, South Korea, China and Australia all slid Thursday, with notable falls in Hong Kong-listed technology companies. Futures contracts for the S&P 500 fluctuated after the gauge snapped a two-day rally Wednesday in a volatile session that saw shares end off their lows.
Fed Chair Jerome Powell said the central bank had a “ways to go” in its campaign to rein in inflation. Policy makers projected rates would end next year at 5.1%, a higher level than previously indicated and well above market projections.
“The Fed was decidedly more bearish than expected,” said Karen Jorritsma, head of Australian equities at RBC Capital Markets. “They will stay the course on inflation, making a hard landing almost a certainty.”
The Bank of England and European Central Bank will deliver rate decisions later Thursday and are expected to follow the Fed with half-point hikes. The euro and the pound were both lower versus the dollar in afternoon trading in Asia.
Treasury yields made small gains in Asia after fluctuating during the US session after the Fed’s hawkish decision and Powell’s comments. The relatively muted moves indicate bond market doubts about the Fed’s staying power in raising and holding rates higher for longer.
The Federal Open Market Committee raised its benchmark rate by 50 basis points to a 4.25% to 4.5% target range. Powell left the door open to a similar hike at the next meeting in February or a step down, while pushing back on bets for reversing course next year.
The Fed confounded those betting on a dovish meeting, and that will be good for the dollar — and bad for stocks — heading into the final stretch of 2022, according to the results of an MLIV Pulse survey of 112 investors.
Elsewhere in markets, China’s benchmark 10-year bond yield was little changed after the central bank pumped more cash than forecast into the banking system in December. The move was expected to bolster bonds that had been roiled by the nation’s abrupt Covid policy shift.
New Zealand government bond yields rose after the economy grew more than twice as much as economists expected in the third quarter, with the rate on 10-year debt jumping 15 basis points.
Oil slipped after rallying almost 9% over the previous three sessions as TC Energy Corp. restarted a section of the Keystone pipeline, allowing for some flows to resume on the major conduit.
Key events this week:
- ECB rate decision and ECB President Lagarde briefing, Thursday
- Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday
- US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
- Eurozone S&P Global PMI, CPI, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 6:49 a.m. London time. The S&P 500 fell 0.6%
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.8%
- Japan’s Topix Index fell 0.2%
- The Hang Seng Index fell 1.5%
- The Shanghai Composite Index fell 0.3%
- Euro Stoxx 50 futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0656
- The Japanese yen fell 0.1% to 135.62 per dollar
- The offshore yuan fell 0.3% to 6.9644 per dollar
- The British pound fell 0.2% to $1.2397
Cryptocurrencies
- Bitcoin fell 0.5% to $17,741.64
- Ether fell 1.5% to $1,291.07
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.49%
- Japan’s 10-year yield was unchanged at 0.25%
- Australia’s 10-year yield advanced nine basis points to 3.45%
Commodities
- West Texas Intermediate crude fell 0.8% to $76.67 a barrel
- Spot gold fell 0.7% to $1,794.93 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Georgina Mckay, Rheaa Rao and Stephen Kirkland.
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