(Bloomberg) — European stocks headed for their longest losses in more than five years after weak German economic data, the dollar rose as investors increased bets on further Federal Reserve policy tightening.
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The Stoxx 600 index retreated for a seventh straight day as German industrial production fell again in July, closing Europe’s largest economy. Bloomberg’s dollar index is on course for an eighth straight week of gains, the longest such gain in data dating back to 2005.
“German industrial production continues to nosedive, and even the most pessimistic bullies are under pressure,” wrote Carsten Brzezczyk, global head of ING Research. “Full hard macro data for July suggests downside risk is high again.”
Pressure on the future of US equities has intensified as more details emerged about China’s plans to ban iPhones from certain government departments and state-sponsored agencies and companies.
Treasury yields rose on most curves, with Wednesday’s extension pushing the two-year yield above 5 percent. The measures followed the Institute for Supply Management’s U.S. services index, which reached 54.4 in August, the highest monthly reading since February and beating all estimates in a Bloomberg survey of economists. A reading above 50 indicates progress.
Following stronger-than-expected reports on everything from consumer spending to residential investment, economists are raising their forecasts for U.S. gross domestic product. That marks a sharp turnaround from three months ago – the last time policymakers updated their own numbers – when there was consensus that the economy would slow in the current quarter.
And it may be enough to ask Fed officials to scale back expectations of rate cuts in 2024. In recent months, traders have trimmed bets on the Fed’s rate hike next year — down from more than 150 basis points earlier to nearly 100 points. In the year 2023
“The ISM service sector report highlights the resilience of the largest segment of the economy,” said Quincy Crosby, global strategist at LPL Financial, noting the higher rates seen in the data. “This is certainly not good news for a data-driven federation.”
Patience is required
Boston Fed President Susan Collins said policymakers should be patient as they review economic data to determine their next steps, and further tightening may still be needed. Meanwhile, James Bullard, the former head of the Federal Reserve Bank of St. Louis, said officials should continue to lead by one more hike this year when they update their forecast later this month.
Risk sentiment spilled over into Asia, with all major markets declining. Chinese stocks were among the best performers rated by property developers, partially reversing the previous session’s rally.
The yuan weakened for the 54th straight day on Thursday as the People’s Bank of China set a tighter-than-expected rate hike. Bloomberg This is the longest since it began its daily survey in 2018.
In commodities, oil declined and was poised to snap a nine-day daily advance — its longest winning streak in more than four years. Gold rose after falling on Wednesday.
Key events this week:
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China forex stock, Thursday
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Eurozone GDP, Thursday
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US first jobless claims, Thursday
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Governor of the Bank of Canada, Tiff McCall, will speak in the economic progress report on Thursday
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Atlanta Federation President Rafael Bostic will speak on Thursday
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New York Fed President John Williams participated in a discussion at the Bloomberg Markets Forum on Thursday.
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Japan’s GDP, Fri
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German CPI, Fri
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US Wholesalers, Consumer Credit, Fri
Some of the major activities in the markets are-
Shares
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The Stoxx Europe 600 was down 0.4% at 8:12 a.m. London time.
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S&P 500 futures fell 0.3%
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Nasdaq 100 futures were down 0.5%
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Dow Jones industrial average futures fell 0.2%
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The MSCI Asia Pacific index fell by 0.7%
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The MSCI emerging markets index fell by 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1 percent.
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The euro fell 0.2 percent to $1.0710
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The Japanese yen rose 0.1% to 147.46 per dollar.
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The offshore yuan fell 0.2% to 7.3328 per dollar.
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The British pound fell 0.3% to $1.2473
Crypto currencies
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Bitcoin rose 0.3% to 25,745.36
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Ether rose 0.5% to $1,635.96.
Bonds
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The 10-year Treasury yield was little changed at 4.28%
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Germany’s 10-year yield was little changed at 2.65%
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Britain’s 10-year yield fell two basis points to 4.51%
Goods
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Brent crude fell 0.3 percent to $90.34 a barrel.
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Spot gold rose 0.1% to $1,918.51 an ounce.
This story was produced with the help of Bloomberg Automation.
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