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Bloomberg
European stocks turned lower with US equity futures on persisting worries about high inflation and slowing growth. The dollar advanced.
The Stoxx Europe 600 Index erased an early gain to trade 0.2% lower. S&P 500 and Nasdaq 100 futures slipped 0.4%. Government bonds falls across Europe as traders braced for a crucial European Central Bank meeting. Treasury yields edged up, taking the benchmark 10-year rate back to 3%.
An Asia-Pacific share gauge rose about 1% and Hong Kong’s Hang Seng Tech Index advanced after new video game approvals encouraged the view that China is loosening a crackdown on internet firms.
Sentiment remains fragile on concerns that interest rates will need to go higher to rein in inflation, stifling economic growth in the process. Later in the week, focus will turn to the US consumer price index reading for clues on the Federal Reserve rate path following the central bank’s outsized hike on May 4. On Thursday, the ECB is set to end trillions of euros of asset purchases.
The ECB has come under huge pressure to rein in record inflation at more than four times the central bank’s target of 2%, and money markets are wagering that a historic half-point increase in July is almost a coin toss. Such a super-size increase would follow similar moves by the Fed, Bank of Canada and Reserve Bank of Australia.
At the same time, policy makers will be mindful to not derail economic recoveries, and traders are looking ahead to the peak of this hiking cycle — and the reverse back to easy policy. Billionaire hedge fund founder Ray Dalio said central banks across the globe will be required to cut interest rates in 2024 after a period of stagflation constrains their economies.
“When you look at the global growth backdrop, it’s certainly slowing and it’s slowing from very high levels and it’s going to feel uncomfortable,†Erin Browne, Pacific Investment Management Co. multi-asset strategies portfolio manager, said on Bloomberg Radio.
The Stoxx Europe 600 falls 0.3% as of 8:50 am London time and futures on the S&P 500 also drop 0.4%. While futures on the Nasdaq 100 fall 0.4%, futures on the Dow Jones Industrial Average also falls 0.3%.
While MSCI Asia Pacific Index rises 1%, the MSCI Emerging Markets Index rises 1.3%.
The Bloomberg Dollar Spot Index rises 0.3% and the euro falls 0.2% to $1.0685.
While the Japanese yen falls 0.7% to 133.46 per dollar and the offshore yuan falls 0.1% to 6.6802 per dollar. The British pound drops 0.3% to $1.2553.
The yield on 10-year Treasuries advanced three basis points to 3.00% and Germany’s 10-year yield advanced two basis points to 1.31%. Britain’s 10-year yield advanced two basis points to 2.24%.