Stock, futures slip after Powell’s hawkish turn

Bloomberg

Stocks in Europe struggled to build on a three-day rally as traders assessed hawkish comments from Federal Reserve Chair Jerome Powell and the latest data on inflation and economic activity.
The Stoxx Europe 600 index edged lower, with ABN Amro slumping almost 10% after the Dutch lender reported first-quarter results burdened by rising costs. The energy sector outperformed as Siemens Gamesa Renewable Energy SA surged after Siemens Energy AG said it may offer to buy the shares it doesn’t own in its Spanish unit.
US futures dipped after the S&P 500 added 2% in a risk rebound. Treasury yields ticked lower and the dollar snapped a three-day losing streak after Powell said the Fed “won’t hesitate” to tighten policy beyond neutral to curb high inflation. MSCI Inc’s Asia-Pacific equity index rises for a fourth day, the longest such streak since February. Oil rises towards $114 a barrel and Bitcoin slipped below $30,000.
In what’s seen as his most hawkish remarks to date, Powell said that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat.
“We’ll have this kind of volatility as people jump in and look at opportunities to buy as markets decline,” Shana Sissel, director of investments at Cope Corrales, said on Bloomberg Television, referring to the Wall Street bounce. The Fed is going
to struggle to achieve a soft
economic landing, she added.
The latest data from Europe didn’t offer any reassurance. New-vehicle sales shrink for a 10th month in a row as the industry remains mired in supply-chain crises. Meanwhile, UK inflation rises to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and the central bank. The pound
weakened and gilt yields fall.
“This is one of the most challenging markets I have been in in my career,” Henry Peabody, fixed income portfolio manager at MFS Investment Management, said on Bloomberg Television. “I suspect at a certain point of time we’re going to have the liquidity of the markets challenged. They
really haven’t been thus far.”
Elsewhere, the Biden administration is poised to fully block Russia’s ability to pay US bondholders after a deadline expires next week, a move that could bring Moscow closer to a default. Sri Lanka, meantime, is on the brink of reneging on $12.6 billion of overseas bonds, a warning sign to investors in other developing nations that surging inflation is set to take a painful toll.