Stocks fall as sentiment dips on rate fears and yields rise

  • Investors cautious ahead of ECB meeting and US CPI data
  • White House expects next inflation numbers to be high
  • Crude hits 13-week high on rising US demand
  • Global growth concerns sap investment sentiment

NEW YORK, June 8 (Reuters) – U.S. and European stocks fell on Wednesday as prospects for a rate hike dampened sentiment, while bond yields rose after euro zone gross domestic product rose above expectations, adding to bets of a more hawkish European Central Bank.

Trading was choppy as investors awaited an ECB meeting on Thursday and U.S. consumer price data on Friday that will highlight the dilemma they face. As central banks tighten policy to control inflation, this could trigger an economic downturn.

The White House said it expected headline inflation to be “high” on Friday. Read more Economists expect annual inflation of 8.3%, according to a Reuters poll.

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Adding to inflation concerns was a surge in crude oil to 13-week highs, while Exxon Mobil (XOM.N) shares closed at a new high for the first time since 2014.

Investors are worried about the economic outlook and its effect on earnings. Citi Research analysts have warned that Intel Corp (INTC.O) may pre-announce weaker-than-expected second-quarter earnings. Intel shares fell 5.3%.

Target (TGT.N) Markets jolted on Tuesday when the retailer slashed its profit margin forecast after reporting a much steeper decline in quarterly earnings in May than expected. Other companies will follow and challenge the second quarter results, said Philip Orlando, chief equity market strategist at Federated Hermes.

“The market turns around here and will retest at least that 3,800 level that we saw in early May over the next couple of months, and it could drop a bit below,” he said. He called the recent rebound rally a dead cat.

The S&P 500 nearly confirmed a bear market when it slid more than 20% from its record closing high on Jan. 3 to an intraday low of 3,810.32 on May 20, but the benchmark closed lower. rise.

The pan-European STOXX 600 index (.STOXX) fell 0.57% as growth concerns weighed on bank stocks, while the MSCI gauge of stocks across the world (.MIWD00000PUS) fell 0.56%.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell 0.81%, the S&P 500 (.SPX) lost 1.08% and the Nasdaq Composite (.IXIC) fell 0.73%.

Data showed the eurozone economy grew much faster in the first quarter of this year than in the previous three months, despite the war in Ukraine, the European Union’s statistics office said. , as it revised earlier estimates upwards. Read more

Investors increased their bets on ECB rate hikes and money markets forecast 75 basis points of rate hikes in September.

ECB rate hike bets

Yields on German and US Treasuries rose after eurozone GDP data beat expectations, adding to bets of a more hawkish ECB.

The yield on 10-year Treasury bills rose 6.6 basis points to 3.036%. Yields also rose on tepid demand for the sale of $33 billion in 10-year notes.

Germany’s 10-year yield, the eurozone benchmark, hit its first new high since 2014 at 1.368%.

The Organization for Economic Co-operation and Development has cut its growth outlook to 3% this year from 4.5% forecast in December. The OECD also raised its inflation estimates, although it said there was limited risk of “stagflation”. Read more

The euro hit a seven-year high against the yen, moving from an upward revision to Q1 growth. Against the dollar, the euro gained 0.12% to $1.0712.

The dollar index rose, while the US currency hit a new 20-year high against the yen. The yen weakened to 134.47 to the dollar, its lowest level since February 27, 2002.

Asian stocks strengthened overnight, with Chinese stocks enjoying some relief from the easing of COVID-19 restrictions, but sentiment was volatile and European indices fell soon after the open. Read more

The Japanese economy contracted slightly less than initially forecast in the first quarter as private consumption remained resilient and businesses rebuilt their inventories. Read more

Oil prices rose about 1% as U.S. crude hit a 13-week high despite rising domestic crude inventories as supplies looked likely to tighten with China easing lockdowns and workers Norwegian tankers planning to strike.

U.S. crude futures rose $2.70 to settle at $122.11 a barrel and Brent rose $3.01 at $123.58 a barrel.

Gold edged higher in choppy trading as concerns over economic growth boosted the metal’s appeal as a safe haven.

US gold futures rose 0.2% to $1,856.50.

Bitcoin fell 3.11% to $30,147.80.

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Reporting by Herbert Lash, additional reporting by Elizabeth Howcroft and Sujata Rao; Editing by Nick Zieminski and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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