(Bloomberg) – Stocks tumbled as Britain’s still-endemic consumer price pressures proved a cautionary tale for global central banks battling inflation and markets betting they’re close the end of their tightening cycles.
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Traders raised bets for further interest rate hikes from the Bank of England after another shock inflation reading, pricing the benchmark to a level not seen since the turn of the century. The Stoxx Europe 600 slipped 0.3%, with the FTSE 100 index down 0.5%. Real estate stocks were among the worst performers, followed by utilities.
S&P 500 futures fell after the gauge posted its first straight loss in nearly four weeks. The FedEx Corp. Economic Indicator fell in extended trade in the United States after its outlook fell below analysts’ consensus estimates on weakened demand.
The setback in UK inflation comes as Fed Chairman Jerome Powell prepares to deliver his half-yearly report to Congress on Wednesday, where he is expected to reiterate warnings that higher rates may be needed to fight against inflation. While policymakers kept interest rates unchanged at their meeting last week, their forecasts imply about two more quarter-point rate hikes or a half-point hike.
Cluttered bullish positioning, narrow reach, lofty valuations and bullish soft-landing bets pose risks for a powerful stock market rally in the second, say Goldman Sachs Group Inc. strategists including Cormac Conners and David J Kostin quarter. They recommend hedging exposure to the S&P 500. Goldman’s base case scenario is for the S&P 500 to rise to 4,700 in 12 months, but the investment bank is also looking at a drop to 3,400 if a recession becomes more likely.
An indicator of dollar strength edged higher after the greenback advanced against all of its Group of 10 counterparts on Tuesday, except the yen.
Elsewhere in the markets, oil rose as traders assessed China’s outlook and braced for comments from Powell. Gold edged lower after falling 0.7% on Tuesday.
Bitcoin rose 3% to hit a six-week high on crypto initiatives involving major players in the traditional financial sector.
Key events this week:
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Federal Reserve Chairman Jerome Powell delivers biannual testimony to Congress before the House Financial Services Committee on Wednesday
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Chicago Fed President Austan Goolsbee speaks on Wednesday
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Eurozone consumer confidence, Thursday
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Tariff rulings in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey on Thursday
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U.S. Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
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Fed’s Powell gives testimony before the Senate Banking Committee on Thursday
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Cleveland Fed’s Loretta Mester speaks Thursday
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Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
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Japan CPI, Friday
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U.S. S&P Global Manufacturing PMI, Friday
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St. Louis Fed President James Bullard speaks Friday
Some of the major movements in the markets:
Shares
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The Stoxx Europe 600 fell 0.2% at 8:29 am London time
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S&P 500 futures are little changed
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Nasdaq 100 futures fell 0.1%
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Dow Jones Industrial Average futures are little changed
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The MSCI Asia-Pacific index fell 0.7%
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The MSCI Emerging Markets Index fell 1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0914
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The Japanese yen fell 0.4% to 142.01 to the dollar
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The offshore yuan fell 0.2% to 7.1965 to the dollar
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The pound was unchanged at $1.2765
Cryptocurrencies
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Bitcoin rose 2.5% to $28,883.21
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Ether rose 1.6% to $1,813.01
Obligations
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The yield on 10-year Treasury bills rose two basis points to 3.74%
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Germany’s 10-year rate rose two basis points to 2.42%
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The UK 10-year yield rose six basis points to 4.40%
Goods
This story was produced with assistance from Bloomberg Automation.
–With help from Abhishek Vishnoi, Farah Elbahrawy and Brett Miller.
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