Stock Selloff Deepens as Traders Adjust Rate Bets: Markets Wrap

(Bloomberg) — Central bankers continued their forceful push-back against market bets for interest rate cuts, deepening a global selloff across stocks and bonds.

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European Central Bank President Christine Lagarde said on Wednesday that aggressive bets on interest-rate cuts aren’t helping policymakers in the battle to subdue inflation. That followed comments on Tuesday from Federal Reserve Governor Christopher Waller, who urged caution on the pace of rate cuts.

Swaps market pricing for a Fed rate cut in March has dropped to around 65% from 80% on Friday, while money markets pushed back bets on the timing of the ECB’s first quarter-point cut to June, from April. German two-year yields — among the most sensitive to changes in monetary policy — rose six basis points to 2.66%.

The Stoxx Europe 600 index slumped more than 1% at the open, with all industry sectors in the red. The Treasury two-year yield climbed five basis points to 4.28% and the dollar extended its rally to a fourth day.

Basic resources led the decline in Europe after fresh data amplified concerns about China’s economy.

Hong Kong’s Hang Seng Index tanked nearly 4%. The CSI 300 mainland Chinese benchmark also fell 1.6%. The losses came after official figures showed while China reached its 2023 economic goal, the country’s housing slump has worsened and domestic demand remained listless.

In commodities, oil declined as the drag from a stronger US dollar and broader risk-off tone offset concerns over escalating Middle East tensions, including continued attacks on ships in the Red Sea by Iran-backed Houthi rebels.

Elsewhere, gold was steady after a Tuesday decline of more than 1% to trade around $2,028 per ounce and Bitcoin was steady above $43,000.

Story continues

Key events this week:

• Eurozone CPI, Wednesday

• US retail sales, industrial production, business inventories, Wednesday

• Fed issues Beige Book survey of regional economic conditions, Wednesday

• New York Fed President John Williams speaks, Wednesday

• ECB President Christine Lagarde and ECB Governing Council members Klaas Knot and Boris Vujcic speak at Davos, Wednesday

• US housing starts, initial jobless claims, Thursday

• Republican presidential primary debate in New Hampshire, Thursday

• ECB President Christine Lagarde participates in Davos panel discussion, Thursday

• ECB publishes account of December policy meeting, Thursday

• Atlanta Fed President Raphael Bostic speaks, Thursday

• Canada retail sales, Friday

• Japan CPI, tertiary index, Friday

• US existing home sales, University of Michigan consumer sentiment, Friday

• ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos, Friday

• San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 1.3% as of 8:10 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.8%

• Futures on the Dow Jones Industrial Average fell 0.4%

• The MSCI Asia Pacific Index fell 1.7%

• The MSCI Emerging Markets Index fell 1.9%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.0874

• The Japanese yen fell 0.5% to 147.86 per dollar

• The offshore yuan was little changed at 7.2189 per dollar

• The British pound rose 0.3% to $1.2669

Cryptocurrencies

• Bitcoin fell 2% to $42,574.14

• Ether fell 2.7% to $2,535.6

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.07%

• Germany’s 10-year yield advanced four basis points to 2.30%

• Britain’s 10-year yield advanced 12 basis points to 3.92%

Commodities

• Brent crude fell 1.1% to $77.46 a barrel

• Spot gold fell 0.2% to $2,024.24 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Iris Ouyang and James Mayger.

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