(Bloomberg) — U.S. futures wiped off earlier losses, while European stocks trimmed declines, signaling easing concern about the Federal Reserve’s hawkish policy stance to quell inflation.
Contracts on the Nasdaq 100 briefly turned positive, while those on the S&P 500 pared declines. European equities pared losses as banks gained. An Asia-Pacific share gauge sank to the lowest since November 2020.
Fed Chair Jerome Powell on Wednesday endorsed interest-rate liftoff in March and opened the door to more frequent, potentially larger hikes than expected. That spurred a rapid turnaround in risk assets, which had rallied before the meeting.
The Treasury yield curve shrank to the flattest since 2020 after the Fed meeting. Two-year Treasuries extended declines Thursday even as longer-dated ones rebounded.
Powell’s Hawkish Surprises Mean Treasuries Rout Flattens Curve
Global stocks are still heading for their worst month since the pandemic roiled markets in 2020. Markets ramped up pricing of Fed hikes, pointing to a 94% probability of five quarter percentage-point moves in 2022.
“The FOMC statement was largely as anticipated, but Fed Chair Powell emphasized upside risks to inflation, pointing to a steady pace of policy withdrawal” Steven Englander, global head of G-10 FX research at Standard Chartered Bank, wrote in a note.
On the earnings front, German software giant SAP SE slid after confirming preliminary quarterly results, while in South Korea, Samsung Electronics Co. fell after profit missed estimates.
Electric-vehicle maker Tesla Inc. set a record for profit but warned of supply chain problems. Tech giant Intel Corp. fell postmarket on a disappointing forecast.
Investors are also keeping an eye on geopolitical tension. The U.S. has handed over its written response to Russia’s security demands, the latest step in the high-stakes diplomacy over Moscow’s buildup of more than 100,000 troops on Ukraine’s border.
Elsewhere, China is considering a proposal to dismantle indebted China Evergrande Group — poster child of the nation’s property slump — by selling the bulk of its assets. A gauge of Chinese real-estate stocks slid.
What to watch this week:
- South African Reserve Bank rate decision Thursday.
- U.S. initial jobless claims, durable goods, GDP Thursday.
- Euro zone economic confidence, consumer confidence Friday.
- U.S. consumer income, University of Michigan consumer sentiment Friday.
For more market analysis, read our MLIV blog.
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