Investors slump ahead of Fed minutes, fears of a eurozone recession grow

  • Waiting for the Fed’s minutes
  • US Thanksgiving holiday on Thursday
  • Stocks earn meager gains globally
  • Eurozone economic data points to a recession
  • China hit by rising COVID-19 infections

LONDON, Nov 23 (Reuters) – Global stocks were little on Wednesday as investors kept their eyes peeled for minutes of a Federal Reserve meeting that could shed light on whether the US central bank is considering moderate interest rate hikes.

The Fed raised rates significantly in a bid to curb rising inflation, and New Zealand’s central bank earlier hiked interest rates by a record 75 basis points to 4.25%, a harbinger of hikes most likely by the Federal Reserve, the European Central Bank and the Bank of England next month.

“There is an expectation that the Fed is probably closer to the end of the rate-hiking cycle than the beginning, certainly to the extent that the rate hikes have already passed,” said Mike Hewson, chief markets analyst. at CMC Markets.

“There is very little interest in Thanksgiving weekend, and as a result the markets are drifting higher by inertia. If you’ve made your money this year, you’re most likely done,” Hewson said.

US markets are closed Thursday for Thanksgiving. The minutes of the Fed’s November meeting will be released on Wednesday.

The MSCI All Country stock index (.MIWD00000PUS) was up 0.12%, although it is still down about 18% for the year.

In Europe, the STOXX (.STOXX) index of 600 companies rose 0.1%, leaving it about 10% behind for 2022. US stock futures, the S&P 500 e-mini, were slightly firmer .

David Bizer, managing partner at investment manager Global Customized Wealth, said investors were being guided by what they think the Fed will do next as signs of a slowdown in the US economy become clearer.

“The appreciation of markets broadly in the fourth quarter is driven by a belief that the Fed is waking up to the fact that the pace and size of their rate hikes could have a near-term conclusion. It gives markets confidence that this it will be the end,” said Bizer.

On the corporate news front, shares of Credit Suisse (CSGN.S) tumbled nearly 6% after the bank said it expected a pre-tax loss of up to 1.5 billion Swiss francs in the fourth quarter.

The euro zone’s downturn in business activity eased slightly in November, but overall demand continued to fall as consumers cut spending amid a cost-of-living crisis, the data showed, adding to the evidence that the currency bloc is entering a recession.

In China, authorities imposed restrictions to curb a rapid rise in COVID-19 infections, compounding investor concerns about the world’s second-largest economy.

Reuters graphics

COVID RESTRICTIONS

The broader MSCI index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.5%, supported by gains in US stocks overnight. The index is up 12% so far this month.

Hong Kong’s Hang Seng Index (.HSI) rose 0.6%, while China’s CSI300 Index (.CSI300) gained 0.1%.

“The biggest story for investors in Asia is still the reopening of China,” said Suresh Tantia, senior investment strategist at Credit Suisse in Singapore.

“We had seen Chinese markets rise up to 20%, but these expectations have been scaled back. We think a reopening will be a slower process and will not happen quickly.”

China reported 29,157 new COVID infections for Nov. 22 on Wednesday, up from 28,127 new cases a day earlier. Case numbers in Beijing and Shanghai are steadily rising and remain high in several major manufacturing and export hubs, prompting authorities to close some facilities.

The benchmark 10-year Treasury yield traded as high as 3.7483% compared to a U.S. close of 3.758% on Tuesday.

The two-year yield, which rises on traders’ expectations of higher Fed funds rates, hit 4.5269% versus a US close of 4.517%.

Ahead of the Fed minutes, the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up 0.019%.

The single euro currency was also slightly firmer on the day at $1.0312.

“The US dollar has lost some of its recent gains[as]central bankers’ consensus on how much they should raise interest rates is fraying,” Commonwealth Bank analyst Tobin Gorey wrote Wednesday.

Oil prices rose slightly as data showed a larger-than-expected drop in US crude last week, outweighing concerns about lower fuel demand from China.

U.S. crude rose 0.8% to $81.59 a barrel, while Brent crude gained 1% to $89.23 a barrel.

Spot gold traded at $1,737 an ounce, down 0.16% on the day.

As the crash of FTX exchange continues to unsettle cryptocurrency markets, Bitcoin is up 2.5% to $16,547.

Reporting by Scott Murdoch in Sydney and Huw Jones in London; Editing by Kenneth Maxwell and Kim Coghill and Miral Fahmy

Our standards: the Thomson Reuters Trust Principles.

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