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(Bloomberg) — Stocks fell, as still-rampant consumer price pressures in Britain proved a cautionary tale for global central banks fighting inflation and markets wagering they’re close to the end of their tightening cycles.
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Traders ramped up bets for further Bank of England interest-rate hikes after another shock inflation reading, pricing the benchmark reaching a level not seen since the turn of the century. The Stoxx Europe 600 slid 0.3%, with the FTSE 100 Index down 0.5%. Real estate stocks were among the worst performers, followed by utilities.
Futures contracts on the S&P 500 ticked lower after the gauge notched its first back-to-back losses in nearly four weeks. Economic bellwether FedEx Corp. tumbled in extended US trading after its outlook fell short of analyst consensus estimates on weakened demand.
The UK inflation setback comes as Fed Chair Jerome Powell prepares to give his semi-annual report to Congress on Wednesday, where he’s expected to reiterate warnings that higher rates may be needed to combat inflation. While the policymakers kept interest rates unchanged at their meeting last week, their forecasts imply around two additional quarter-point rate hikes or one half-point increase.
Crowded bullish positioning, narrow breadth, high valuations, and optimistic soft-landing bets pose risks to a power second-quarter stock rally, according to Goldman Sachs Group Inc. strategists including Cormac Conners and David J Kostin. They recommen hedging S&P 500 exposure. Goldman’s base case is for the S&P 500 to climb to 4,700 in 12 months but the investment bank also sees a drop to 3,400 as possible if a recession becomes more likely.
A gauge of dollar strength edged up after the greenback advanced against all of its Group-of-10 counterparts Tuesday except the yen.
Elsewhere in markets, oil rose as traders weighed China’s outlook and prepared for commentary from Powell. Gold fell slightly after dropping 0.7% on Tuesday.
Bitcoin rose as much as 3% to a six-week high on crypto initiatives involving major players from the traditional financial sector.
Key events this week:
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Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
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Chicago Fed President Austan Goolsbee speaks, Wednesday
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Eurozone consumer confidence, Thursday
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Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
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US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
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Fed’s Powell delivers testimony before the Senate Banking Committee, Thursday
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Cleveland Fed’s Loretta Mester speaks Thursday
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Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
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Japan CPI, Friday
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US S&P Global Manufacturing PMI, Friday
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St. Louis Fed President James Bullard speaks, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.2% as of 8:29 a.m. London time
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S&P 500 futures were little changed
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Nasdaq 100 futures fell 0.1%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index fell 0.7%
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The MSCI Emerging Markets Index fell 1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0914
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The Japanese yen fell 0.4% to 142.01 per dollar
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The offshore yuan fell 0.2% to 7.1965 per dollar
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The British pound was unchanged at $1.2765
Cryptocurrencies
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Bitcoin rose 2.5% to $28,883.21
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Ether rose 1.6% to $1,813.01
Bonds
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The yield on 10-year Treasuries advanced two basis points to 3.74%
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Germany’s 10-year yield advanced two basis points to 2.42%
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Britain’s 10-year yield advanced six basis points to 4.40%
Commodities
This story was produced with the assistance of Bloomberg Automation.
—With assistance from Abhishek Vishnoi, Farah Elbahrawy and Brett Miller.
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