US equity-index futures and European stocks declined after the Federal Reserve rebuffed expectations for a dovish tilt and said interest rates will go higher for longer. The European Central Bank’s signals on consumer-price pressures deepened the selloff.
(Bloomberg) — US equity-index futures and European stocks declined after the Federal Reserve rebuffed expectations for a dovish tilt and said interest rates will go higher for longer. The European Central Bank’s signals on consumer-price pressures deepened the selloff.
Contracts on the S&P 500 and Nasdaq 100 gauges fell at least 1.3% each. Europe’s equity benchmark, the Stoxx 600, fell after the ECB saw 2024 inflation higher than previously forecast.
Demand for haven assets sent the dollar and Swiss franc higher amid a wave of rate hikes from Taiwan to Norway. The euro trimmed losses. Britain’s pound slid after an expected half-point rate hike from the Bank of England.
A global rally sparked by softer-than-forecast US inflation came to an abrupt halt on Wednesday after policymakers signaled a peak rate that was far above market expectations and sought to dispel hopes for a rate cut next year. Chair Jerome Powell reaffirmed the central bank won’t back away from its fight against inflation despite mounting fears of job losses and a recession.
“The Fed was more hawkish than markets had expected,” Jack McIntyre, a money manager at Brandywine Global Investment Management, wrote in a note. “They seemingly still want financial markets to tighten further, which essentially means they want lower equity prices.”
Investors are also parsing a bevy of US economic data Thursday. While retail sales were worse than expected, initial jobless claims came in lower than expected, underscoring the strength in the labor market.
Key events this week:
- ECB President Lagarde briefing, Thursday
- Eurozone S&P Global PMI, CPI, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 1.3% as of 8:45 a.m. New York time
- Futures on the Nasdaq 100 fell 1.7%
- Futures on the Dow Jones Industrial Average fell 1%
- The Stoxx Europe 600 fell 1.6%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.2% to $1.0661
- The British pound fell 0.8% to $1.2321
- The Japanese yen fell 0.8% to 136.55 per dollar
Cryptocurrencies
- Bitcoin fell 1.9% to $17,498.87
- Ether fell 2.8% to $1,274.04
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.45%
- Germany’s 10-year yield advanced seven basis points to 2.01%
- Britain’s 10-year yield declined six basis points to 3.26%
Commodities
- West Texas Intermediate crude fell 0.3% to $77.04 a barrel
- Gold futures fell 1.7% to $1,787.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Georgina Mckay.
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©2022 Bloomberg L.P.
