Stocks ease as Federal Reserve’s interest rate-cut doubts creep in

BLOOMBERG

Stocks retreated and the dollar rose after a Federal Reserve policymaker dampened hopes of speedy interest rate cuts from the US central bank.  Europe’s Stoxx 600 equity index opened around flat, and US equity futures contracts slipped about 0.2% as it became clear central banks will lean against traders’ rate-cut bets. Financial shares rose, led by UBS Group AG, which gained more than 4% as stronger-than-expected client inflows offset losses linked to absorbing Credit Suisse.
The dollar and US Treasury yields rose for a second day, after Minneapolis Fed President Neel Kashkari said it’s too soon to declare victory over inflation. He also said over-tightening monetary policy is preferable to doing too little.
Traders are waiting to see if that view is echoed in speeches this week from other Fed officials, including Chair Jerome Powell and could subsequently pare their wagers on rate cuts starting by mid-2024.
“There are a number of risk factors that could prevent inflation from easing in the nice, tidy sort of manner that people who are expecting a central bank pivot would like to see,” said Tom O’ Hara, a portfolio manager at Janus Henderson Investors.
High oil prices and signs China is ramping up stimulus for its economy, are possible inflation risks, he added. In a sign central banks are not necessarily done hiking interest rates, Australia resumed policy tightening on Tuesday, and raised its inflation forecast.  Emerging market stocks and currencies broadly retreated in line with the firmer dollar and as a deeper-than-expected decline in Chinese exports highlighted continued slowdown in global trade.
South Korea’s Kospi Index lost over 3% after November 6’s rally that was triggered by a short-selling ban. The economic growth concerns knocked oil prices lower.