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Bloomberg
Equities extended declines on Friday, with an index of global stocks on track for the worst week since June, while a gauge of the dollar continued its ascent, reflecting bets for outsize Federal Reserve interest rate hikes.
US futures dropped, suggesting the selloff that drove the S&P 500 index to its lowest close in about two months isn’t over yet. Europe’s benchmark share gauge headed for a fourth day of losses. Stocks slumped in Japan, Hong Kong and mainland China, with little impact on sentiment from Chinese industrial-production and retail-sales data that beat expectations.
Policy-sensitive two-year Treasury yields extended a rise to the highest since 2007, deepening the curve inversion that’s seen as a recession signal. The latest US economic data painted a mixed picture for the economy that backed the view for hawkish monetary policy. Swaps traders are pricing in a 75 basis-point hike when the Federal Reserve meets next week, with some wagers appearing for a full-point move.
“Everything points to another 75 basis-point rate hike by the Fed when it meets next week. The likelihood that it will have to go ‘big’ again in November is elevated, too,†said Raphael Olszyna-Marzys, an economist at Bank J Safra Sarasin.
The market weakness follows data showing applications for US unemployment insurance fell for a fifth straight week, suggesting demand for workers remains healthy. Retail sales indicated spending on goods is moderating.
Adding to concerns about a slowing economy, package-delivery giant FedEx Corp withdrew its earnings forecast, citing weakness in Asia and challenges in Europe as it pulled its prior outlook and reported preliminary results for the latest quarter that fell well short of Wall Street’s expectations. Business conditions could deteriorate further in the current period, FedEx said.
European mail and parcel delivery companies took a hit, led by Deutsche Post AG, down as much as 7.6%.
Meanwhile, the offshore yuan remained on the weaker side of 7 to the dollar, even as the People’s Bank of China set the reference rate for the currency stronger-than-forecast for a 17th straight day.
Oil was poised to fall for a third week amid the deteriorating global economic backdrop, which has fuelled demand concerns at a time when the buoyant dollar makes crude more expensive for most buyers.
Futures on the S&P 500 fell 0.8% in New York. Futures on the Nasdaq 100 fell 1.1%. Futures on the Dow Jones Industrial Average fell 0.7%. The Stoxx Europe 600 fell 0.9%. The MSCI World index fell 0.4%.
The Bloomberg Dollar Spot Index rose 0.2%. The euro fell 0.2% to $0.9977. The British pound fell 0.6% to $1.1399. The Japanese yen rose 0.2% to 143.23 per dollar. West Texas Intermediate crude rose 0.2% to $85.27 a barrel. Gold futures fell 0.4% to $1,669.80 an ounce.