Global stock selloff deepens as traders adjust rate bets

BLOOMBERG

Central bankers continued their forceful push-back against market bets for interest rate cuts, deepening a global selloff across stocks and bonds. European Central Bank (ECB) President Christine Lagarde and Governing Council member Klaas Knot warned on Wednesday that aggressive bets on interest-rate cuts aren’t helping policymakers in the battle to subdue inflation.
That followed comments on Tuesday from Federal Reserve Governor Christopher Waller, who urged caution on the pace of easing. Swaps market pricing for a Fed rate cut in March has dropped
to around 65% from 80%, while money markets pushed back bets on the timing of the ECB’s first quarter-point cut to June, from April. German two-year yields — among the most sensitive to changes in monetary policy — rose five basis points to 2.65%. The Stoxx Europe 600 index slumped more than 1% at the open. All industry sectors were in the red, with real estate and retailers among the hardest hit. Futures on the Nasdaq 100 fell as much as 0.9%. The Treasury two-year yield climbed five basis points to 4.28% and the dollar extended its rally to a fourth day.
Still more evidence that the battle against inflation isn’t over came from the UK, where price increases accelerated unexpectedly for the first time in 10-months, prompting traders to scale back their expectations for rate cuts from the Bank of England this year.
Gilts tumbled and the pound gained as traders aggressively trimmed expectations for monetary-policy easing this year. “Inflation was never going to be a straight line down, as we have seen in the US and Europe,” said Luke Hickmore, investment director at abrdn. “Rates will fall this year but market expectations around when and how much are going to be very volatile.”
Meanwhile, fresh concerns about China’s economy added another headwind for equities. Basic resources and luxury-goods stocks were among the biggest decliners in Europe amid worries about slackening demand in a key market.
Hong Kong’s Hang Seng Index tanked nearly 4%. The CSI 300 mainland Chinese benchmark also fell 1.6%. The losses came after official figures showed while China reached its 2023 economic goal, the country’s housing slump has worsened and domestic demand remained listless. Elsewhere, gold was steady after a decline of more than 1% to trade around $2,028 per ounce and Bitcoin was steady above $43,000.
The Stoxx Europe 600 fell 1.1% in London. S&P 500 futures fell 0.5%. Nasdaq 100 futures fell 0.7%. Futures on the Dow Jones Industrial Average fell 0.3%. The MSCI Asia Pacific Index fell 1.7%. The MSCI Emerging Markets Index fell 1.9%. The Bloomberg Dollar Spot Index rose 0.2%. The euro was little changed at $1.0867. The Japanese yen fell 0.4% to 147.85 per dollar. The offshore yuan was little changed at 7.2244 per dollar. The British pound rose 0.1% to $1.2652. Bitcoin fell 1.7% to $42,683.9. Ether fell 2.4% to $2,544.91.
The yield on 10-year Treasuries was little changed at 4.06%. Germany’s 10-year yield advanced three basis points to 2.28%. Britain’s 10-year yield advanced 10 basis points to 3.90%.
Brent crude fell 1.4% to $77.21 a barrel. Spot gold fell 0.3% to $2,021.93 an ounce.