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Wall Street extends losses as recession worries mount
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Crude oil at lowest since January
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Bank of Canada signals slowing pace of rate hikes
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China eases COVID rules but imports and exports slump
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Overall asset performance: http://tmsnrt.rs/2yaDPgn
NEW YORK/MILAN, Dec 7 (Reuters) – Global stocks fell further and Treasury yields weakened on Wednesday as U.S. worker productivity data beat forecasts but extended a weak trend, further complicating the debate over how much and how fast US interest rates will rise.
Third-quarter productivity rebounded at a slightly faster pace than initially expected. Economists said the reading pointed to high labor costs and inflation remaining high, adding pressure on the Federal Reserve to keep raising rates.
But benchmark US yields and the dollar both fell.
“Slower rate hikes have been the global trend lately, but the Fed remains a wild card. Overall, it’s a choppy and anxious market ahead of next week’s Fed meeting,” he said. Joe Manimbo, senior market analyst at Convera in Washington.
The S&P 500 and Nasdaq also lost ground, adding to the previous day’s sell-off on warnings from three major US banks of a looming recession amid questions about how sticky inflation could be kept alive. uncertainty about the Fed’s policy path.
“If you look at previous decades of high levels of inflation, it usually takes a few years for inflation to moderate,” said Chris Dyer, head of global equities at Eaton Vance in London.
“Global earnings estimates across the world are likely to come down for 2023,” Dyer said. “Those (companies) that have better pricing power and business models will be able to prove more resilient.”
The MSCI gauge of stocks across the world lost 0.26%, while the broad European STOXX 600 index lost 0.62% to mark its fourth consecutive decline as fears of a global recession intensified.
On Wall Street, the Dow Jones Industrial Average rose 0.18%, the S&P 500 gained 0.00% and the Nasdaq Composite fell 0.31%.
Many market participants believe inflation is moderating and bond yields have peaked, allowing the Fed and other central banks to begin to slow rate hikes when policymakers meet next week.
The Bank of Canada signaled on Wednesday that its historic tightening campaign was coming to an end by raising benchmark overnight interest rates by 50 basis points to their highest level in nearly 15 years.
Earlier, India slowed the pace of rate hikes with a 35 basis point hike in its key rate to 6.25%, less than the three 50 basis point hikes it had made earlier.
While Fed Chairman Jerome Powell warned that the fight against inflation was far from over, he said late last month that the Fed could slow the pace of its rate hikes as early as December. .
Powell’s comments prompted the market to set a lower peak interest rate, which federal funds futures showed Wednesday at 4.933%, down from a recent high of 5.1%.
The yield on the benchmark 10-year Treasuries fell 6.7 basis points to a nearly three-month low of 3.446%.
Gold prices rose, helped by a decline in the dollar and Treasury yields, as investors anticipate the projection of slower rate hikes at the Fed’s Dec. 13-14 meeting.
Spot gold rose 0.6% to $1,782.28 an ounce.
The dollar fell as traders weighed an uncertain economic outlook, while the Chinese yuan strengthened as authorities relaxed some of the country’s zero COVID rules.
The euro gained 0.42% to $1.0513 and the yen strengthened 0.49% to 136.35 to the dollar.
China’s national health authority said on Wednesday that asymptomatic COVID-19 cases and those with mild symptoms can self-treat during their home quarantine, the strongest sign so far that Beijing is preparing for life. with the disease.
Market reaction was negative as the focus shifted to China’s ability to execute its policy shift.
“It’s hard to assume that China’s reopening won’t be inflationary when the reverse was true for the rest of the world and that will be the challenge going into 2022,” said Geoff Yu, strategist at BNY Mellon.
The Shanghai Composite Index fell 0.4%, Hong Kong’s Hang Seng fell 3.2% and the yuan strengthened 0.3% to 6.9768 to the dollar.
Oil hit its lowest level since the start of the year in volatile trading, after US government data showed an unexpected rise in fuel inventories, fueling fears over demand in a market already spooked by a uncertain economy.
U.S. crude fell 1.72% to $72.97 a barrel and Brent to $78.09, down 1.59% on the day.
(Reporting by Herbert Lash, additional reporting by Danilo Masoni in Milan; Tom Westbrook in Singapore; Editing by Elaine Hardcastle and John Stonestreet)
