Stocks Fall as Traders Assess Rates and Earnings: Markets Wrap

(Bloomberg) — European stocks slipped and Wall Street equity futures dropped as investors weighed the impact of the latest inflation data from the US and the UK on the outlook for interest rates and as they digested results from major companies.

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Europe’s Stoxx 600 was dragged lower as Barclays Plc dropped the most in more than 11 months after the bank’s earnings missed estimates. Miners weighed on the market as Glencore Plc fell, even as the commodities giant announced a record payout to shareholders. Contracts for the S&P 500 retreated after the index ended Tuesday little changed. Nasdaq 100 futures also slid after the gauge, which is more sensitive to higher interest rates, rose 0.7% on Tuesday.

An Asian equity benchmark was headed for the lowest close in more than a month. Turkish stocks soared on their return from a week-long suspension following devastating earthquakes.

The two-year Treasury yield remained near the highest level since November after adding 10 basis points Tuesday. The 10-year Treasury benchmark was broadly flat after falling four basis points in the prior session. The dollar edged higher against all of its Group-of-10 peers.

Investors are evaluating US CPI data that showed prices rose more than forecast, and subsequent comments from Federal Reserve officials. UK inflation also remains stubbornly high, in double digits and five times above the Bank of England’s targeted level, according to data out Wednesday. Still, the pound weakened as the figures showed that CPI fell more than expected in January, while traders trimmed their bets on further rate hikes.

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“I think the risk for global markets is definitely the way the market has decided and is overjoyed about the inflationary story ending — It is not believing that inflation is here to stay,” Aarthi Chandrasekaran, a portfolio manager at Shuaa Capital, said on Bloomberg Television. “I think eventually the market will lose a bit of its call on the equity side.”

Federal Reserve Bank of Philadelphia President Patrick Harker said the Fed was nearing the point where rates were restrictive enough. “In my view, we are not done yet,” he said. “But we are likely close.”

Harker’s Richmond Fed counterpart Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”

“Inflation is still falling, but it’s not falling as quickly as we hoped,” Benjamin Kirby, co-head of investments for Thornburg Investment Management, said in an interview with Bloomberg Television. “The overall narrative is pretty much intact,” he added. “The Fed is nearing its terminal rate.”

Oil fell for a second day after after an industry estimate pointed to a large build in US inventories and investors assessed the outlook for US monetary policy. Gold slipped.

Turkey’s Borsa Istanbul 100 Index rose more than 9% as the benchmark gauge partly recouped losses of tens of billions of dollars that followed the Feb. 6 twin earthquakes in the country’s southeast. Investors took heart from the government’s measures to channel billions of liras from state institutions and the stock exchange’s steps to contain volatility.

Elsewhere, the People’s Bank of China added more cash into the financial system to meet a rebound in loan demand after the nation eased Covid restrictions.

Key events:

• US retail sales Wednesday

• US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday

• France CPI, Russia GDP Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.3% as of 8:19 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.7%

• Futures on the Dow Jones Industrial Average fell 0.4%

• The MSCI Asia Pacific Index fell 1.3%

• The MSCI Emerging Markets Index fell 1.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%

• The euro fell 0.3% to $1.0710

• The Japanese yen fell 0.2% to 133.37 per dollar

• The offshore yuan fell 0.3% to 6.8560 per dollar

• The British pound fell 0.8% to $1.2079

Cryptocurrencies

• Bitcoin fell 0.6% to $22,128.41

• Ether fell 0.6% to $1,547.52

Bonds

• The yield on 10-year Treasuries was little changed at 3.75%

• Germany’s 10-year yield declined one basis point to 2.43%

• Britain’s 10-year yield declined eight basis points to 3.44%

Commodities

• Brent crude fell 1.4% to $84.41 a barrel

• Spot gold fell 1.1% to $1,833.50 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Tassia Sipahutar, Allegra Catelli, Richard Henderson and Tony Jordan.

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