(Bloomberg Opinion) — European stocks fell as investors awaited key rate decisions across the region. US stock futures rose, signaling a recovery after a tumultuous day of losses on Wall Street on Wednesday.
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The Stoxx Europe 600 Index fell 0.5% ahead of policy announcements from the Bank of England and its counterparts in Switzerland and Norway. Bank stocks were among those that fell the most, following weakness in their US peers. Contracts for the S&P 500 and Nasdaq 100 advanced at least 0.7%. An index of Asian stocks rose more than 1% as indicators in Hong Kong and mainland China recovered.
Treasury Secretary Janet Yellen told lawmakers the government was not considering “blanket” deposit insurance to stabilize the banking system, sending shares in the sector falling rapidly. At around the same time, following the expected 25 basis point hike from the Federal Reserve, Chairman Jerome Powell was rejecting bets on rate cuts this year and said he was prepared to keep raising borrowing costs until the Inflation will show signs of cooling.
The dollar’s weakness extended into a sixth day, the longest losing streak since April 2021, with the dollar down against all of its Group of 10 counterparts. Sensitive two-year Treasury yields to politics stabilized after a 23 basis point drop on Wednesday. German and UK government bonds rose.
While markets are in a “higher volatility regime” these days amid uncertainty about the outlook for rates and economic growth, some degree of moderation is possible on Thursday, according to John Bromhead, strategist at Australia & New Zealand Banking Group. “I suspect that now that major event risk is out of the way, the risk tone may improve throughout the day,” he said.
The swap market shows that investors are divided on the chances that Fed officials will add another 25 basis points to their benchmark in May. Despite Powell’s guidance, cut expectations have deepened with the market suggesting that the effective federal funds rate will fall to around 4.1% in December.
“I wouldn’t expect the market to accept these rate cuts anytime soon and may very well price in more cuts if data deteriorates from here,” Matthew Hornbach, global head of macro strategy at Morgan Stanley, told Bloomberg Television.
However, Powell himself said in response to questions that officials “just don’t” see cuts this year and will increase more than expected if necessary. “Rate cuts are not in our base case,” he said.
Elsewhere in the markets, oil fell as investors weighed developments at the Fed and digested a mixed snapshot of supply and demand for US gold and Bitcoin rose.
On the other hand, investors were on tenterhooks waiting for another report from Hindenburg Research, the US short seller that targeted Gautam Adani’s group earlier this year. There were no details on the subject of the new report.
Key events this week:
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Eurozone Consumer Confidence Thursday
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BOE interest rate decision, Thursday
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Swiss National Bank rate decision and press conference, Thursday
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US New Home Sales, Initial Jobless Claims, Thursday
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US Treasury Secretary Janet Yellen testifies before a House Appropriations subcommittee on Thursday.
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Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
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US Durable Goods Friday
Some of the main movements in the markets:
Stocks
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The Stoxx Europe 600 fell 0.4% at 8:18 a.m. London time
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S&P 500 futures rose 0.7%
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Nasdaq 100 futures rose 1%
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Dow Jones Industrial Average futures rose 0.5%
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The MSCI Asia Pacific Index rose 1.3%
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The MSCI Emerging Markets Index rose 1.7%
coins
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The Bloomberg Dollar Spot Index fell 0.4%
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The euro rose 0.4% to $1.0904
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The Japanese yen rose 0.3% to 130.99 per dollar
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The offshore yuan rose 0.6% to 6.8218 per dollar
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The British pound rose 0.4% to $1.2312
CRYPTOCURRENCIES
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Bitcoin rose 1.1% to $27,681.08
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Ether rose 1% to $1,755.47
Captivity
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The 10-year Treasury yield rose three basis points to 3.47%.
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Germany’s 10-year yield fell six basis points to 2.27%
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The UK 10-year yield fell four basis points to 3.41%.
raw Materials
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Brent crude fell 0.6% to $76.23 a barrel
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Spot gold rose 0.4% to $1,977.14 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Georgina Mckay.
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