Dollar rises, stocks fall due to Fed bull rates: markets take stock

(Bloomberg) — The dollar rose and stocks fell along with Wall Street futures on expectations of a sharper US rate hike following comments from two Federal Reserve officials.

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Bloomberg’s dollar indicator rose 0.5%, offsetting a yearly loss, while benchmark Treasury yields edged up for the fourth day. Yields on 2-year and 10-year Treasury bonds are at their highest levels for 2023. Data on Thursday showed US producer prices rose in January, the highest since June.

The European Stoxx 600 fell 0.8%, a day after climbing to its highest level in a year. The S&P 500 and Nasdaq 100 contracts tumbled after the benchmarks fell more than 1% on Thursday. The Asian stock index was set for the third weekly fall in a row, which was the worst fall since October.

Cleveland Federal Reserve Bank President Loretta Mester said she sees “strong economic case” for another 50 basis point hike, while St. Louis President James Bullard said he would not rule out support for a half-percentage hike. March meeting. While Mester and Bullard are in the discussions, they are not voting on monetary policy decisions this year.

According to Helen Zhu, chief investment officer at Hong Kong’s Nan Fung Trinity, the market has been “too optimistic” this year about any imminent Fed reversal.

“We don’t necessarily think there will be a 50 basis point rate hike at the next Fed meeting, but we think expectations of a significant cut in the second half of this year are probably exaggerated,” Zhu said. This is stated on the air of Bloomberg Television.

Investors are increasing their bets on how much the Fed will raise rates in this tightening cycle. Now they are seeing the federal funds rate rise above 5.2% in July, according to trading in the US money markets. This compares to a perceived peak of 4.9% just two weeks ago.

For Commerzbank AG, the dollar still has room to grow. “As long as inflation doesn’t come down, the US dollar will win,” Esther Reichelt, the bank’s foreign exchange strategist, told Bloomberg Television. “It’s not something we see, but it’s definitely a risk,” she said.

In China, the central bank added the largest amount of cash on record to the banking system to avoid a liquidity squeeze. Earlier it was reported that the government is selecting veterans of regulation, known for their tough fight against financial wrongdoing, as the new heads of the country’s bank and securities supervisors.

Shares of China Renaissance Holdings Ltd. dropped by 50% in Hong Kong, the most on record, after saying they were unable to contact Bao Fang, chairman, chief executive officer and majority shareholder of a Chinese investment bank.

Much of the dollar-denominated bonds issued by Indian conglomerate Adani Group left troubled territory after it said it would settle the upcoming maturities of the debt. The move is seen as the group’s latest attempt to boost investor sentiment after the US short selling debacle.

Bitcoin pulled back after three days of gains as worries about a U.S. crackdown eased.

On the commodities side, oil began a weekly decline as rising US inventories and the prospect of further tightening by the Federal Reserve eclipsed gains amid new signs of improving energy demand in China. Gold has dropped.

Some of the major movements in the markets are:

Stock

  • The Stoxx Europe 600 was down 0.9% as of 8:09 am London time.

  • S&P 500 futures fell 0.6%

  • Nasdaq 100 futures fell 0.8%

  • Futures for the Dow Jones industrial index fell by 0.5%

  • The MSCI Asia Pacific index fell 1.3%.

  • The MSCI Emerging Markets Index fell 1.1%.

Currencies

  • Spot Bloomberg Dollar Index up 0.5%

  • The euro fell 0.4% to $1.0635.

  • The Japanese yen fell 0.8% to 134.95 per dollar.

  • The offshore yuan fell 0.3% to 6.8909 per dollar.

  • The British pound fell 0.6% to $1.1923.

Cryptocurrencies

  • Bitcoin fell 3.6% to $23,646.17.

  • Ether fell 1.7% to $1,654.12.

Bonds

  • The 10-year Treasury yield rose six basis points to 3.92%.

  • The yield on German 10-year bonds rose eight basis points to 2.56%.

  • The yield on British 10-year bonds rose by 10 basis points to 3.60%.

Goods

  • Brent crude fell 1.3% to $84.05 a barrel.

  • Spot gold fell 0.9% to $1,820.64 an ounce.

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rob Verdonk and Beth Thomas.

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