Stocks retreated on Thursday, with sentiment subdued by the Federal Reserve’s hawkish tone and weak economic data from China.
(Bloomberg) — Stocks retreated on Thursday, with sentiment subdued by the Federal Reserve’s hawkish tone and weak economic data from China.
Futures for US benchmarks slid after Chairman Jerome Powell said nearly all Fed officials expected it would be appropriate to raise interest rates “somewhat further” this year following Wednesday’s pause. The tech-heavy Nasdaq 100 was set to trim some of its 37% advance in 2023.
Global miners Anglo American Plc and Rio Tinto Plc fell as basic resources stocks led declines in Europe following news that Chinese economic activity softened in May. Most industry sectors dropped as investors prepared for the European Central Bank’s next policy announcement in the fight against inflation. But retailers were a bright spot, with Hennes & Mauritz AB and Asos Plc rallying on improving prospects.
Meanwhile, concerns over European gas supplies are back on traders’ radar. European natural gas prices spiked as the Netherlands is set to announce it will close the region’s biggest gas site later this year. Benchmark futures soared as much as 24% on Thursday to their highest level since early April.
After the Fed quashed enthusiasm in markets about the potential for imminent rate cuts, investors are about to get an update from the ECB. The bank is expected to raise its deposit rate by a quarter-point to 3.5% later Thursday, with attention mostly focused on what else officials intend to do to tackle inflation that’s still three times the 2% target.
“With the Fed’s policy rate likely to peak soon, the ECB may not want to be too far behind,” said Geoff Yu, a foreign exchange and macro strategist at BNY Mellon. “As tempting it may be to price a turn, we believe this week’s meeting is far too soon.”
The dollar trimmed its first advance in three days, gains prompted by traders mulling prospects for further US rate hikes. Treasury yields climbed. The euro strengthened ahead of the ECB policy announcement.
In other corporate news, SoftwareOne Holding AG surged as much as 21% after Bain Capital offered about $3.2 billion to take the Swiss IT services provider private. Nikola Corp. jumped in US premarket trading, extending the electric truckmaker’s rally to a seventh session.
In Asia, Chinese equities gained after the People’s Bank of China cut a key lending rate amid speculation that more stimulus is on the way. That also boosted US-listed Chinese stocks, with Alibaba Group Holding Ltd. and Baidu Inc. among those advancing in premarket trading.
The PBOC’s move also forms part of broader stimulus efforts to support real estate and domestic demand. Data showing retail sales moderated more than expected in May added to worries about further slowing in China. Industrial production was also lower, but met consensus forecasts.
Selling in the yen pushed the currency to the lowest level since November, prompting a warning from Japanese Chief Cabinet Secretary Hirokazu Matsuno that excessive movements weren’t desirable.
In commodities, gold dropped for a fifth day in its longest losing run since February, as the outlook for more Fed tightening dulled bullion’s appeal.
Key events this week:
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
- Bank of Japan rate decision, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.4% as of 6:41 a.m. New York time
- Nasdaq 100 futures fell 0.7%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0842
- The British pound was little changed at $1.2660
- The Japanese yen fell 0.7% to 141.13 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to $24,863.24
- Ether fell 0.3% to $1,633.68
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.82%
- Germany’s 10-year yield advanced five basis points to 2.50%
- Britain’s 10-year yield advanced three basis points to 4.42%
Commodities
- West Texas Intermediate crude rose 0.9% to $68.90 a barrel
- Gold futures fell 1.2% to $1,945.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Richard Henderson.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.