US Futures Dip, Global Stocks Slide as Investors Confront Hawkish Fed
London (Mar 1) Global stocks resumed their week-long side Thursday, following on from the worst month on Wall Street in at least two years, as investors continue to re-price equities in the face of a resurgent U.S. dollar and faster moves on interest rates from the Federal Reserve.
U.S. equity futures suggest a tough start for the bulls on Wall Street after yesterday's triple-digit declines for the Dow Jones Industrial Average, with contracts tied to the benchmark priced 137 points lower from Wednesday's close, indicating an opening-bell decline of 125 points after snapping its longest monthly winning streak in 59 years. Contracts linked to the broader S&P 500 seen 12.25 points to the downside while the Nasdaq was set to open around 22 points lower.
Much of the overnight trading action, as well as this week's market pullback, continues to stem from Tuesday's Humphrey-Hawkins testimony from newly-appointed Fed chairman Jerome Powell, who will face lawmakers again Thursday in the form of the Senate Banking Committee today at 10:00 am eastern time.
"Powell's testimony in front of the House Financial Services Committee on Tuesday was very bullish on the economy and led many to believe that a fourth rate hike is on the table this year," said Oanda strategist Crag Erlam. "While this isn't a million miles from what markets are pricing in, it did trigger another negative response from markets with US indices falling around two and a half percent since and positioned for further losses today."
Earlier this week, Powell'ls suggest of gradual, yet steady rate hikes set against an upbeat assessment of the world's biggest economy boosted government bond yields and accelerated bets on faster rate hikes between now and the end of the year, each of which added to the recent pressure on global stocks.
That dynamic was in play again during Asia trade, with the dollar rising to a near-six week high of 90.722 against a basket of its global peers even as benchmark 10-year U.S. Treasury note yields held at around 2.86%.
The moves pushed regional stocks lower, with the MSCI Asia ex-Japan index falling 0.4% into the close of trading while Japan's Nikkei 225 ended the session 1.56% lower at a two-week low of 21,724.47 points.
Europe's Stoxx 600 benchmark, the broadest measure of share prices, was marked 1% lower by mid-day in Frankfurt and pegged at 375.86 points, the lowest since Feb. 24. Germany's DAX performance index fell nearly 1.6% while Britain's FTSE 100 slipped 0.8% to slip below the 7,200 point level.
WPP plc (WPP) shares were the biggest mover in the region, falling the most in more than 20 years before before being halted by regulators after the world's biggest advertizing group posted its weakest full-year sales since the financial crisis and warned that "fundamental changes" in the industry would likely mean little growth across the whole of 2018.
The dollar's rebound also held down gains for global oil prices, although prices were pressured yesterday as well after data from the U.S. Energy Information Administration showed larger-than-expected increases in crude and gasoline stocks last week and said production hovered around the 10 million barrel per day mark in November and December.
Brent crude contracts for April delivery, the global benchmark, were little changed from their Wednesday close in New York at $64.71 per barrel while WTI contracts for the same month were marked 10 cents higher at $61.74 per barrel.
Bitcoin prices continued to climb Thursday as investors shrugged-off reports of a potential crackdown on cryptocurrency markets by the U.S. Securities and Exchange Commission.
The Wall Street Journal reported late Wednesday that the SEC had issued subpoenas linked to its probe into so-called initial coin offerings, a process in which companies raise money through the sale of new digital coins, which some studies suggest hit $5.6 billion last year and at least $1.6 billion over the past two months.
Bitcoins were marked 3.5% higher in Thursday trading on the bitstamp exchange in Luxembourg, which feeds prices into the CME Group futures contract, and changing hands at $10,675 each, a move that extends the world's best-known digital currency's gains to 56% from its early February trough.
TheStreet
