(Bloomberg) — U.S. futures wiped losses, with dip buyers back in action after a selloff sparked by a hawkish Federal Reserve.
In Europe, retail and travel stocks dragged down benchmark indexes, while bank shares rallied after Deutsche Bank AG raised its outlook. Contracts on all three major U.S. gauges turned positive, with those on the Nasdaq 100 recovering from a slump of as much as 2.2%.
Tesla Inc. dropped in premarket trading after warning of supply-chain issues, while Intel Corp. fell on a disappointing forecast.
Fed Chair Jerome Powell on Wednesday endorsed interest-rate liftoff in March and opened the door to more frequent, potentially larger hikes than expected. While a rally on Wall Street fizzled after the meeting, the rapid turnaround in futures indicates buy-the-dip sentiment remains strong after a volatile week.
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
Oil fell from a seven-year high, while the dollar rose. A gauge of Asia-Pacific shares fell to a 14-month low.
“As supply constraints ease, inflation will fall through 2022, and so monetary tightening pressures will fade,” wrote Seema Shah, chief strategist at Principal Global Investors. “This tightening pace should neither spook markets nor disrupt the economic expansion.”
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 earnings season continued its uneven start. German software giant SAP SE slid after confirming preliminary quarterly results, while in South Korea, Samsung Electronics Co. fell after profit missed estimates.
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 the indebted China Evergrande Group by selling the bulk of its assets.
Bitcoin rose toward $37,000. Commodity-linked currencies weakened, while bonds slid in Australia and New Zealand.
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.
Stocks
- The Stoxx Europe 600 fell 0.4% as of 9:43 a.m. London time
- Futures on the S&P 500 were little changed
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 2.4%
- The MSCI Emerging Markets Index fell 1.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.4% to $1.1197
- The Japanese yen fell 0.3% to 115.00 per dollar
- The offshore yuan fell 0.5% to 6.3676 per dollar
- The British pound fell 0.3% to $1.3427
Bonds
- The yield on 10-year Treasuries declined two basis points to 1.84%
- Germany’s 10-year yield advanced four basis points to -0.03%
- Britain’s 10-year yield advanced seven basis points to 1.26%
Commodities
- Brent crude fell 0.3% to $89.73 a barrel
- Spot gold fell 0.3% to $1,814.96 an ounce
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