(Bloomberg) — Stocks edged higher after the Federal Reserve announced interest rates and traders awaited the Bank of England’s policy decision, which hangs in the balance.
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The European Stoxx 600 index fell by 0.7%, almost all industrial groups in the red. U.S. benchmark futures fell, extending losses on Wall Street on Wednesday. A benchmark of Asian shares fell the most in more than a month. Treasuries were mostly lower, as the dollar strengthened.
The BOE announcement caps a busy day for European central banks. The Swiss Franc fell after the Swiss National Bank made an unexpected announcement. Sweden’s Riksbank raised its key rate as expected and said further hikes were possible, while Norway’s central bank said more tightening could come in December after raising rates as economists had predicted.
The Fed kept its target range on Wednesday, with updated quarterly forecasts showing most officials would favor another rate hike in 2023. Policymakers also see little easing next year, with the median forecast for federal funds at the end of the year at 5.1%, compared to 4.6% when estimates were updated at the end of June.
Lee Hardman, strategist at MUFG Bank Ltd. said: “People expected dovishness from the Fed, but what surprised them was the size of the dovishness.” Two out. So it was more hawkish than the markets were pricing in.
The pound weakened ahead of Thursday’s BOE policy decision. Traders bet on further tightening measures by the central bank after UK inflation unexpectedly eased, with markets seeing a 50% chance of a quarter-point increase on Thursday. If the BOE takes a hike, they’re betting it will be the last. Goldman Sachs and Nomura went further, saying rates had already peaked. Bloomberg Economics expects an increase.
Economists Dan Hanson and Ana Andrade said: “Now, the BOE is signaling that it may pause its hiking cycle this month, or maybe even accelerate, sending a signal that this move will be the last of the cycle.”
Treasury yields were broadly higher after the two-year yield, the most sensitive to the Fed’s move since 2006, was on Wednesday.
The dollar gained against most major currencies, but the yen was flat against the yen, which traded at 148 to the dollar after weakening to its lowest level since November on Wednesday.
John Weil, chief strategist at Nikko Asset Management in Tokyo, said hopes for official support for the Japanese currency were high. Japan’s finance ministry may intervene at $150 to the dollar because it will be hard to deal with further inflation.
The yen fell to a 53-year low against a broader basket of peers and adjusted for inflation, according to data from the Bank for International Settlements.
This week’s series of central bank policy meetings ends on Friday in Japan.
Read more: Traders on intervention look at the dollar-yen near 150
Among private stocks on Thursday, Next Plc outperformed in London after the British retailer lifted its forecast. FedEx Corp rose in US premarket trading after the courier raised its outlook for EPS from the low. ARM Holdings Plc fell, as the chip designer edged closer to its IPO price, while rising bond yields weighed on growth stocks, while its tech peers fell.
Elsewhere, oil’s breakout rally is taking a breather as a smaller-than-expected decline in U.S. crude inventories has technical resistance to further gains.
Key events this week:
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Eurozone consumer confidence, Thursday
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Bank of England policy meeting, Thursday
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US Leading Index, Initial Jobless Claims, Existing Home Sales, Thursday
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China Bund Summit, Fri
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Japan CPI, PMI, Fri
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Bank of Japan rate decision, Friday
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Eurozone S&P Global Eurozone PMI, Fri
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US S&P Global Manufacturing PMI, Fri
Some major activities in the markets are-
Shares
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The Stoxx Europe 600 was down 0.8% as of 9:42 a.m. London time.
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S&P 500 futures fell 0.4%
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Nasdaq 100 futures were down 0.7%
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Dow Jones industrial average futures fell 0.2%
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The MSCI Asia Pacific index fell by 1.5%
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The MSCI emerging markets index fell by 1.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2 percent.
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The euro was little changed at $1.0653.
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The Japanese yen was little changed at $148.23.
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The offshore yuan was little changed at 7.3092 against the dollar.
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The British pound fell 0.3% to $1.2301
Crypto currencies
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Bitcoin fell 0.5% to $26,970.08
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Ether fell 0.3% to $1,619.41
Bonds
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The yield on 10-year Treasuries rose two basis points to 4.43 percent.
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Germany’s 10-year yield rose four basis points to 2.74%.
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Britain’s 10-year yield rose four basis points to 4.25%.
Goods
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Brent crude fell 1.2 percent to $92.40 a barrel
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Spot gold fell 0.3% to $1,925.44 an ounce
This story was produced with the help of Bloomberg Automation.
— with assistance from Tasia Sipahutar and Richard Henderson.
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