(Bloomberg) — U.S. stock futures fell, giving up early gains as traders braced for another U.S. rate hike amid rising anxiety that the Federal Reserve could tighten and increase the odds of a hard landing.
The Stoxx 600 index fell 0.8%, accompanied by losses in real estate and mining. U.S. equity futures also declined after briefly trading higher, with the technology-heavy and rate-sensitive Nasdaq 100 underperforming the S&P 500.
The US central bank begins its meeting today and is expected to raise rates again by 75 basis points on Wednesday, signaling rates are above 4% and then a pause. The long-hold strategy is rooted in the idea that the central bank would avoid the disastrous stop-go policy of the 1970s that allowed inflation to get out of hand. Market participants have scaled back expectations of an even bigger hike, with only two of 96 economists in a Bloomberg survey now predicting a full move.
“The Federal Reserve is likely tightening policy right in the teeth of a recession,” Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, wrote in an email. “The stock market’s addiction to Fed easing when stocks fall may be what Jerome Powell aims to eliminate by aggressively raising rates, in addition to inflation.”
10-year Treasury yields topped 3.5%, while yields on the more policy-sensitive two-year rate hit their highest since 2007 and are poised to break above 4 %, reflecting harsh fears.
Meanwhile, in a worrying trend for stocks, real rates (inflation-adjusted Treasury yields) rose to their highest level since 2011. After staying in negative territory for a decade of easy money policies, the real types had been key. driver of concentrations of risky assets.
Markets are pricing in the two-year Treasury yield which is close to 4% and “it may go a bit higher, but not much at the moment,” Peter Kinsella, head of currency strategy at Union Bancaire Privee Ubp SA. , he told Bloomberg Television. It would still be reasonable for the 10-year Treasury yield to go toward 3.5% or 3.7%, “but there’s probably not much more juice in that trade,” he said.
In China, banks kept their main lending rates unchanged after the central bank halted its monetary easing and advocated a weaker yuan.
Elsewhere, Bitcoin struggled to return to the $20,000 level. Oil fell below $86 a barrel and gold fell.
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Key events this week:
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Housing in the United States begins, Tuesday
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EIA Crude Oil Inventory Report, Wednesday
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US existing home sales, Wednesday
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Federal Reserve decision, followed by a press conference with Chairman Jerome Powell on Wednesday
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Bank of Japan monetary policy decision, Thursday
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Bank of England interest rate decision, Thursday
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Conference US leading index, initial jobless claims, Thursday
Some of the main movements in the markets:
stocks
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S&P 500 futures were down 0.5% at 6:09 a.m. New York time
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Nasdaq 100 futures fell 0.6%
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Dow Jones Industrial Average futures fell 0.4%
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The Stoxx Europe 600 fell 0.8%
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The MSCI World Index was little changed
coins
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The Bloomberg Dollar Spot index rose 0.2%
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The euro fell 0.2% to $1.0003
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The British pound fell 0.1% to $1.1417
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The Japanese yen fell 0.3% to 143.70 per dollar
good ones
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The 10-year Treasury yield advanced five basis points to 3.54%
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Germany’s 10-year yield advanced nine basis points to 1.89%
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UK 10-year yield advanced 12 basis points to 3.25%
Merchandise
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West Texas Intermediate crude fell 0.3% to $85.50 a barrel
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Gold futures fell 0.1% to $1,676 an ounce
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