(Bloomberg) – Stock markets around the world extended losses on Thursday, as 10-year U.S. Treasuries surged above 4% for the first time since November, a sign that the Federal Reserve’s warnings of higher interest rates higher interest for longer are finally sinking.
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Europe’s Stoxx 600 stock index fell 0.5%, after falling to its lowest level in three weeks on Wednesday, as warmer-than-expected German inflation data prompted money markets to bet on further rises in European Central Bank interest rate. Markets are now gearing up for the release of block-wide numbers later today. US stock futures also fell, with contracts on the rate-sensitive Nasdaq down about 1% after it and the S&P 500 index ended February with losses. In Asia, Hong Kong shares fell 1.5%
The focus is now on the potential rise in interest rates in the United States and the euro zone, with swap markets now pricing a Fed rate of 5.5% in September, and some even betting on 6%. US 10-year rates, the main reference rate for the global cost of capital, rose by 40 basis points in February and are consolidating their rise above 4%. ECB interest rates are now expected to exceed 4%.
Such bets were encouraged this week by a series of hot inflation readings across Europe, alongside a surge in the US manufacturing price indicator. Fed officials, meanwhile, continued to reinforce their hawkish stance – Atlanta Fed Chairman Raphael Bostic on Wednesday urged continued rate hikes above 5% to ensure that inflation is not picking up, while the Minneapolis Fed’s Neel Kashkari expressed concern. few signs that rate hikes are slowing the service sector.
This is dampening the appetite for risk-taking in markets around the world, with some even concerned that China’s post-Covid economic recovery could exacerbate global price pressures.
China’s reopening is a much-needed bright spot for investors, but in terms of inflation “adds upward cyclical pressure due to the sheer amount of demand” it brings, especially in commodities, said. said Charu Chanana, senior market strategist at Saxo Capital Markets. on Bloomberg Television.
The Fed’s hawkish rate bets supported the US dollar against its Group of 10 peers, with the greenback looking set to extend February’s 2.6% gain. The currencies of commodity and energy exporters such as Australia, New Zealand and Norway fell the most while the euro and the pound lost around 0.4%.
The overseas-traded Chinese yuan also fell, following Wednesday’s rally of more than 1%, fueled by strong economic data.
Oil was slightly lower after a two-day gain as traders weighed the potential recovery in Chinese demand amid concerns over US monetary policy tightening.
Some of the major movements in the markets:
Shares
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The Stoxx Europe 600 fell 0.5% at 8:25 am London time
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S&P 500 futures fell 0.6%
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Nasdaq 100 futures fell 0.8%
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Dow Jones Industrial Average futures are little changed
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The MSCI Asia-Pacific index fell 0.4%
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The MSCI Emerging Markets Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.3% to $1.0635
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The Japanese yen fell 0.3% to 136.56 per dollar
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The offshore yuan fell 0.5% to 6.9148 per dollar
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The British pound fell 0.5% to $1.1972
Cryptocurrencies
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Bitcoin fell 0.6% to $23,405.94
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Ether fell 0.8% to $1,644.25
Obligations
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The yield on 10-year Treasury bills rose four basis points to 4.03%
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The German 10-year rate rose three basis points to 2.74%
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The UK 10-year yield rose two basis points to 3.86%
Goods
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Brent fell 0.2% to $84.11 a barrel
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Spot gold fell 0.2% to $1,832.13 an ounce
This story was produced with assistance from Bloomberg Automation.
–With help from Rheaa Rao and Tassia Sipahutar.
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