Selloff Deepens As Boe Takes Center Stage After Fed Warning Markets Fold

Most Read by Bloomberg S&P 500 futures fell 0.7% after Wednesday’s 2.5% drop. Discounts spread to Europe and Asia, where confirmation of China’s stance on Covid-Zero dashed hopes for a reopening. Moderna Inc., Qualcomm Inc. and Roku Inc. fell in premarket trading, while Etsy Inc. and eBay Inc. they rose. The Fed’s 75 basis point hike is likely to be followed by a similar hike from the Bank of England later on Thursday, although rates there are potentially capped by the risk of a deep recession. Powell disappointed investors betting on a turnaround as the US economy remains resilient to stubbornly high inflation. “Every time the market gets a little bit of hope, a rolled-up newspaper hits it in the nose,” said Scott Rundell, chief investment officer at Mutual Ltd. “There’s still a lot of volatility ahead.” Investors are worried about the impact of central bank tightening on economic growth, and Powell left little doubt that he is prepared to push interest rates as high as needed to stamp out inflation. European Central Bank President Christine Lagarde warned on Thursday that a “mild recession” was likely, but that it would not be enough on its own to stem soaring prices. The dollar gained as investors looked to US jobs data, which may help determine the pace of upcoming rate hikes. The pound fell more than 1% as concerns grew that a smaller-than-expected BOE hike could weigh on sterling’s slide, while Norway’s krone fell after its central bank posted the smallest hike in its benchmark interest rate since June . The story continues “There is potential profit in dollar long positions after the big moves after the FOMC meeting outcome and Powell’s press conference,” said David Forrester, senior FX strategist at Credit Agricole CIB in Hong Kong. Global bonds fell on Thursday in the wake of the Fed meeting. Yields on the two-year note rose to 4.71%, but are still below the 5.06% ceiling on yields priced into Fed funds futures. “Given the assessment of the bond market, markets are becoming increasingly convinced that the path to the terminal rate will include a recession,” said Quincy Krosby, chief global strategist at LPL Financial. Wheat prices fell after Russia agreed to restore a deal allowing safe passage of Ukrainian crop exports. Oil fell after Powell’s comments on interest rates overshadowed supply tightening. Key events this week:

Bank of England rate decision Thursday US Factory Orders, Durable Goods, Trade, Initial Jobless Claims, ISM Services Index, Thursday US non-farm payrolls, unemployment, Friday

Some of the main movements in the markets: inventories

S&P 500 futures were down 0.7% at 7:15 a.m. New York time Nasdaq 100 futures fell 0.9% Dow Jones Industrial Average futures fell 0.5% The Stoxx Europe 600 fell 1.2% The MSCI World Index fell 1.6%

currency

The Bloomberg Dollar Spot index rose 0.6% The euro fell 0.8% to $0.9744 The British pound fell 1.1% to $1.1261 The Japanese yen was down 0.2% at 148.21 yen per dollar

Cryptocurrencies

Bitcoin rose 0.4% to $20,249.94 Ether rose 2% to $1,541.44

Bindings

The 10-year bond yield rose nine basis points to 4.19% Germany’s 10-year yield rose 10 basis points to 2.24% Britain’s 10-year yield rose six basis points to 3.46%

Goods

West Texas Intermediate crude fell 1.5% to $88.64 a barrel Gold futures fell 1.6% to $1,623.70 an ounce