Register now to get free unlimited access to Reuters.com
LONDON (Reuters) – European stock markets opened in the red on Wednesday after US economic data prompted traders to raise bets on a Federal Reserve interest rate hike, sending the dollar to a 24-year high against the Japanese yen.
US Treasury yields jumped and the dollar got a boost from data on Tuesday that showed the US service industry rebounding in August, bolstering expectations of an interest rate hike by the Federal Reserve. Markets were pricing in a 73% chance of a 75 basis point hike at the upcoming Federal Reserve meeting. Read more
Markets were dealt another blow in Asian trading from data showing slowdown in Chinese export growth in August. MSCI’s broadest index of Asia Pacific shares outside Japan fell to its lowest level since mid-2020 (MIAPJ0000PUS.). Read more
Register now to get free unlimited access to Reuters.com
Chinese exports and imports lost momentum as rising inflation crippled external demand and new restrictions from the coronavirus and heat waves disrupted production, reviving downside risks for a shaky economy. Read more
“Government bond yields across the board are rising and this is putting pressure on stock markets,” said David Madden, market analyst at Equiti Capital.
“This also comes at a time when fears of a global economic slowdown are rising and bond traders expect further rate hikes.”
At 0808 GMT, the MSCI global stock index was down 0.3% on the day (.MIWD00000PUS)The European STOXX 600 Index was down 0.4%. (.stoxx).
London’s FTSE 100 Index is down 0.7% (.FTSE).
The US Dollar Index reached around 110.24, after hitting a 20-year high of 110.69 earlier in the session.
The 10-year US Treasury yield hit its highest level since mid-June at 3.365% before easing back a bit.
“I wouldn’t be surprised if the Fed started to worry a little bit about the strength of its local currency,” said David Madden of Equiti, who said a strong dollar could have a negative impact on US exports.
The Japanese yen was at 144.015 against the US dollar, after hitting its weakest level since August 1998 at 144.38 yen to the dollar. The Japanese government has said it wants to act if the “rapid one-sided” moves in the currency market continue. Read more
The Chinese yuan fell to its lowest level in two years, approaching the psychologically important 7 mark for the dollar despite the steps taken by the authorities to stop its decline. Read more
Eurozone government bond yields rose in early trading, ahead of an expected 75 basis point interest rate hike from the European Central Bank on Thursday.
The euro rose 0.2% to $0.9925.
The British pound was slightly lower at $1.15045. Liz Truss, who took office as Britain’s prime minister on Tuesday, pledged immediate action to help the economy, which is facing double-digit inflation and a prolonged stagnation expected. Read more
Showing correlation with mainstream financial markets, cryptocurrency bitcoin touched its lowest level since mid-June, with the market capitalization of all cryptocurrencies dropping below $1 trillion, according to data provider CoinGecko.
The Bank of Canada is expected to announce a significant rate hike later on Wednesday as it struggles to curb inflation at its highest level in nearly four decades. Read more
As Europe struggles with rising energy prices, market watchers await the meeting of EU energy ministers on Friday.
Gas prices jumped on Monday after Russia said its Nord Stream 1 pipeline would remain closed.
Register now to get free unlimited access to Reuters.com
(Reporting by Elizabeth Hawcroft), Editing by Angus McSwan
Our criteria: Thomson Reuters Trust Principles.
“Devoted student. Bacon advocate. Beer scholar. Troublemaker. Falls down a lot. Typical coffee enthusiast.”