Stocks Mixed After Fed Officials Douse Pivot Hope: Markets Wrap

(Bloomberg) — Global stocks struggled for direction after two days of losses fueled by the sense that the Federal Reserve and other major central banks see no reason to pause their rate-hiking cycles anytime soon. early

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European equities opened higher, although they were on track to snap a four-week bullish streak. US index futures swung between losses and gains, a day after markets were hit lower by hawkish comments from President St. Louis Fed James Bullard, who said that interest rates needed to be raised to at least 5%-5.25% to curb inflation. The MSCI World Index stabilized, extending its weekly loss to 1%.

Dollar and Treasury yields were little changed, having jumped on Thursday following Bullard’s comments. But Bullard is the latest policymaker to warn markets that while inflation appears to be easing off decade highs, policy needs to tighten further to dampen price pressures. Markets on Thursday raised their expectations of where US rates might peak, and eased the likelihood of rate cuts next year.

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“Inflation having peaked is not a reason for the Fed to turn around and cut rates,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said on Bloomberg Radio. “That’s the fundamental disconnect that still exists between the Fed and the market.”

Fears are also growing that relentlessly rising rates will hit economic growth, with a key segment of the Treasury yield curve at its most inverted in four decades — such an inversion has historically led to recession emerged in the world’s largest economy. Oil was poised for a weekly drop, weighed down by concerns about a deteriorating demand outlook.

Ellen Hazen, chief market strategist at FLPutnam Investment Management, said that if the Fed kept increasing rates at the current pace, “by the time they get the information that they’ve been able to slow the economy and slow inflation, it could be too good. late.”

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“It’s too early to know exactly how this will go through the economy and that’s the biggest risk,” she told Bloomberg Television.

Elsewhere, the dollar’s retreat allowed other major currencies to strengthen, with the Japanese yen getting a further boost from data showing inflation at 40-year highs. The pound tried to recoup Thursday’s losses as investors assessed the impact of the government’s budget on an already shrinking economy.

Earlier, Hong Kong’s benchmark Hang Seng Index posted a third straight week of gains, thanks to China’s steps to support the property sector and the easing of Covid restrictions. On Friday, the benchmark technology gauge touched a two-month high, led by Alibaba, which missed second-quarter revenue but managed to buy back shares heavily.

Bitcoin was on course for a weekly gain even as Sam Bankman-Fried’s FTX empire collapsed continuing to roil the crypto market.

This week’s highlights:

Some of the main moves in the markets:

Stock

  • The Stoxx Europe 600 rose 0.4% as of 8:42 London time

  • S&P 500 futures fell 0.1%

  • Futures on the Nasdaq 100 fell 0.1%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The MSCI Asia Pacific Index rose 0.1%

  • The MSCI Emerging Markets Index was little changed

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Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.0351

  • The Japanese yen was little changed at 140.07 per dollar

  • The offshore yuan rose 0.2% to 7.1311 per dollar

  • The British pound rose 0.2% to $1.1886

Cryptocurrency

  • Bitcoin rose 0.2% to $16,710.71

  • Ether rose 0.5% to $1,211.12

Bonds

  • The yield on 10-year Treasuries advanced one basis point to 3.78%

  • The German 10-year yield advanced three basis points to 2.05%

  • Britain’s 10-year yield advanced four basis points to 3.25%

Commodities

  • Brent crude rose 0.3% to $90.02 a barrel

  • Spot gold rose 0.1% to $1,763.06 an ounce

This story was produced with assistance from Bloomberg Automation.

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