Global stocks are falling as an interest rate hike from the central bank looms

LONDON (Reuters) – Global stocks fell on Monday as investors braced for the final round of rate hikes across the Atlantic this year from three central banks, hoping that the pace of steep increases in borrowing costs would finally show signs of catching up. mitigation.

Oil prices rose as one of the major pipelines supplying the United States remained closed, while Russian President Vladimir Putin threatened to cut production in retaliation for Western price caps on his exports.

The dollar rose against the Japanese yen but fell against a basket of currencies after data on Friday showed US producer prices rose more than expected last month, in a sign of persistent inflationary pressures, ahead of the key US consumer price index for November on Tuesday, when from A slowdown in annual core inflation is expected.

“This week’s event-heavy event risk agenda will set the core themes for 2023,” ING Bank said.

ING said the market consensus continues to “underestimate” the risks of higher inflation continuing for longer, and the Fed’s “serious second guess” regarding rate cuts in the second half of next year.

MSCI stock index for all countries (.MIWD00000PUS) The index fell 0.3 percent, after losing about 18 percent so far this year, wiping out all the gains made in 2021.

In Europe, the STOXX index (.STOXX) From 600 companies decreased by 0.7%.

Economists expect the Federal Reserve on Wednesday, and the European Central Bank and Bank of England on Thursday to raise interest rates by 50 basis points, still a slowdown from the 75 basis point hikes seen at recent meetings.

Central banks will start to take a softer stance this week, said Patrick Spencer, vice president of equities at investment bank Baird, although Tuesday’s CPI data will be decisive.

“It’s the last important week of the year, after this week you don’t have a real kind of catalyst. If CPI is a muffled number, we’re in the races and we’ll start the year-end rally,” Spencer said.

Regardless of the CPI, deflationary pressures are building, with crude oil prices lower this year, as have iron ore, lumber and home prices, Spencer said.

“All this talk of a recession,” Spencer said, “I think it certainly lies in the price, it’s in the markets. The key to a recession is employment in general, and I think employment is going to be stronger than people give it credit for.”

S&P 500 and Nasdaq futures changed little.

Asian stocks fall

In Asia, MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) It fell 1.2%, erasing almost all of the previous week’s gains stemming from optimism that China is finally opening up its economy as the coronavirus policy is dismantled.

Japanese Nikkei index (.N225) down 0.2%.

Chinese charts (.CSI300) Hong Kong’s Hang Seng fell 1.1%. (.HSI) It fell 2.2%, as investors’ focus shifted away from crippling COVID-19 restrictions to the surge in infections now crippling the economy.

While the Fed is widely expected to raise interest rates by 50 basis points on Wednesday at its final meeting of 2022, though the central bank’s updated economic outlook and Fed Chair Jerome Powell’s press conference are also in focus.

“We also want to understand if Jay Powell opens the door to a slowdown to the pace of walking 25 basis points from February — again, while in line with market pricing, this could be considered as we’re closer to the end of the hiking cycle and it’s a head of research at Pepperstone,” said Chris Weston, head of research at Pepperstone. , the US dollar is modestly negative.

Kevin Cummins, chief US economist at NatWest, said any surprise in the November CPI report is unlikely to deter the Fed from a 50 basis point rate hike, though it will play a larger role in Powell’s policy statement and tone of the press. conspiracy.

In the currency markets, the US dollar slipped 0.143% to 104.89, although it wasn’t too far from its five-month low of 104.1 a week ago.

The British pound settled at $1.2259, while the Australian dollar also fell by 0.3%, to $0.6745.

Treasury yields remained largely flat on Monday. The yield on the benchmark 10-year Treasury slipped to 3.5433%, compared to closing in the US at 3.5670%. The two-year yield touched 4.3294%, down slightly from its US close of 4.330%.

Brent crude futures fell 0.4% to $75.77 a barrel, while US West Texas Intermediate crude was $70.84 a barrel, down 0.3%.

Spot gold was down 0.4% at $1,790 an ounce.

(Reporting by Hugh Jones; Editing by Bradley Perrett, Sam Holmes and David Evans)

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