Global stocks ceded earlier gains, as data showing economic resilience and persistent inflationary pressures cemented expectations of further interest rate hikes in the US and Europe.
(Bloomberg) — Global stocks ceded earlier gains, as data showing economic resilience and persistent inflationary pressures cemented expectations of further interest rate hikes in the US and Europe.
Europe’s Stoxx 600 equity benchmark retreated along with futures on the S&P 500 and the Nasdaq with sentiment dampened by a warning from Amazon.com Inc. after the market close that growth in its key cloud computing business is cooling. Japanese stocks bucked the trend, surging as much as 1.5% on the central bank’s decision to double down on its commitment to stimulus.
Treasuries recouped some of Thursday’s losses, with the 10-year benchmark yield falling six basis points.
Markets remain on edge, as data showing a surprise increase in US inflation pressures reinforced expectations of a Federal Reserve interest rate hike in May, and possibly in June. In Europe, a growth rebound in France and a forecast-beating expansion in Spain have fanned hopes Europe can avert a recession, but an uptick in consumer-price gains cements the case for further European Central Bank rate increases.
“What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,”’ wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets.
Analysts at Berenberg said equities’ strong year-to-date gains had been driven by resilient earnings and receding pessimism on economic growth, but “risks are skewed to the downside over the coming months, with headwinds from tighter policy, margin headwinds and US recession.”
On Thursday, US equities enjoyed the biggest daily gain since January, thanks to solid earnings from technology firms, including Meta Platforms Inc. and Intel Corp. However, the Amazon warning soured the mood while some other firms such as Snap Inc. and Pinterest also disappointed.
Read more: Snap Shares Set for Biggest Drop in Six Months After Sales Fall
A recovery in banking shares on the back of solid results from bulge-bracket banks also helped to revive risk appetite.
Meanwhile, the Fed and European Central Bank will almost certainly proceed with rate hikes next week, the Bank of Japan left its short-term policy rate at minus 0.1% in the first meeting under new governor Kazuo Ueda, maintained its 0.5% ceiling for 10-year bond yields and lauched a policy review that may take one-and-a-half years.
That drove the yen 1.4% lower versus the dollar. The greenback gained against a basket of Group-of-10 currencies.
Elsewhere, oil prices headed for a sixth straight monthly decline, weighed down by slowdown concerns in the US and Asia.
Here are some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.6% as of 10:10 a.m. London time
- S&P 500 futures fell 0.5%
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.5%
- The MSCI Asia Pacific Index rose 0.2%
- The MSCI Emerging Markets Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.4% to $1.0983
- The Japanese yen fell 1.4% to 135.82 per dollar
- The offshore yuan was little changed at 6.9352 per dollar
- The British pound fell 0.4% to $1.2450
Cryptocurrencies
- Bitcoin fell 1.5% to $29,201.12
- Ether fell 0.7% to $1,906.54
Bonds
- The yield on 10-year Treasuries declined six basis points to 3.46%
- Germany’s 10-year yield declined 10 basis points to 2.36%
- Britain’s 10-year yield declined eight basis points to 3.71%
Commodities
- Brent crude fell 0.9% to $77.69 a barrel
- Spot gold fell 0.2% to $1,983.15 an ounce
This story was produced with the assistance of Bloomberg Automation.
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