European stocks and U.S. stock futures fell on Thursday, extending their decline as sentiment weakens after an upbeat start to the new month.
The Stoxx 600 slid 0.2%, reversing earlier gains, after the regional European gauge closed down 1% on Wednesday. Contracts following Wall Street’s S&P 500 fell 0.8% after the broad index ended the previous session down 0.2%, in a decline that dampened the shares’ biggest two-day advance Americans in over two years.
Stocks have largely sold off this year, with the last week capping the longest streak of quarterly losses since the 2008 financial crisis. As the US Federal Reserve and other central banks turn the screw on monetary policy to curb the Inflation, the prospect of ever higher borrowing costs has affected corporate valuations.
At the same time, fears have intensified in recent months that the Fed and its peers will raise interest rates in a protracted downturn, compressing demand as they induce a global recession – exacerbating the threat to financial health. companies.
Government debt markets came under renewed pressure in European morning trading, with the yield on Britain’s 10-year gilt adding 0.14 percentage point to 4.18% as its price fell. The government securities market was in crisis last week as the new UK government’s ‘mini’ budget sparked fears over the scale of borrowing needed to fund deep tax cuts.
The intensity of the sell-off eased last Wednesday when the Bank of England stepped in to calm the turmoil – but trading has been volatile since.
The US 10-year equivalent yield, considered a global benchmark for borrowing costs, added 0.02 percentage point to 3.78%.
New data on Thursday will offer fresh clues to the state of unemployment in the world’s largest economy, with first jobless claims expected to hit 203,000 for the week ending October 1, up from 193,000 the previous week. The Labor Department’s widely watched monthly jobs report is due Friday.
The level of labor market heat is widely seen as a key influence on Fed decision-making, with signs of weakness raising hopes that the central bank will act less aggressively to contain inflation.
Market prices currently reflect expectations for the main US interest rate to peak at 4.5% in March 2023, down from end-September expectations of nearly 4.7%. The Fed’s current target range is between 3 and 3.25% after three very strong consecutive increases of 0.75 percentage points.
Various Fed officials were also scheduled to speak on Thursday. Their remarks will be closely assessed for any clues about the likelihood of a pivot to a less assertive political strategy.
In currencies, the dollar added 0.4% against a basket of six peers after rising more than 1% in the previous session. The pound slipped 0.6% to hit $1.125 against the greenback, remaining at the levels it was trading at before British Chancellor Kwasi Kwarteng unveiled his fiscal plans on Sept. 23.