(Bloomberg) -- Stocks retreated on Thursday, with sentiment subdued by the Federal Reserve’s hawkish tone and as weak economic data from China weighed on resources companies.
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Mining and energy stocks led declines in Europe after figures showed Chinese economic activity softened in May, while investors prepared to hear the European Central Bank’s next policy announcement in the fight against inflation. Futures for US benchmarks edged lower after Chairman Jerome Powell said nearly all Fed officials expected it would be appropriate to raise interest rates “somewhat further” in 2023 after Wednesday’s pause.
In corporate news, Hennes & Mauritz AB shares rallied after the Swedish clothing retailer’s second-quarter revenue exceeded pre-pandemic levels and June got off to a good start. SoftwareOne Holding AG surged as much as 21% after Bain Capital offered about $3.2 billion to take the Swiss IT services provider private.
After the Fed quashed enthusiasm in markets about the potential for imminent rate cuts, investors are about to get an update from the ECB. The bank is expected to raise its deposit rate by a quarter-point to 3.5% later Thursday, with attention mostly focused on what else officials intend to do to tackle inflation that’s still three times the 2% target.
“With the Fed’s policy rate likely to peak soon, the ECB may not want to be too far behind,” said Geoff Yu, a foreign exchange and macro strategist at BNY Mellon. “As tempting it may be to price a turn, we believe this week’s meeting is far too soon.”
The dollar rose for the first time in three days as the hawkish Fed comments prompted traders to mull prospects for further US rate hikes. Treasury yields climbed.
In Asia, Chinese equities gained after the People’s Bank of China cut a key lending rate amid speculation that more stimulus is on the way. Hong Kong’s benchmark index advanced as much as 2.1%, with notable strength in tech stocks.
The PBOC’s move also forms part of broader stimulus efforts to support real estate and domestic demand. Data showing retail sales moderated more than expected in May added to worries about further slowing in China. Industrial production was also lower, but met consensus forecasts.
“They need a larger package, not just about the monetary policy or mortgage rate cut but also to restore the confidence of the private sector,” Raymond Yeung, Greater China Economist at ANZ Group Holdings Ltd., said in an interview with Bloomberg Television.
Selling in the yen pushed the currency to the lowest level since November, prompting a warning from Japanese Chief Cabinet Secretary Hirokazu Matsuno that excessive movements weren’t desirable.
Key events this week:
European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
Bank of Japan rate decision, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.2% as of 8:59 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.1%
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0827
The Japanese yen fell 0.8% to 141.28 per dollar
The offshore yuan rose 0.2% to 7.1592 per dollar
The British pound was little changed at $1.2655
Cryptocurrencies
Bitcoin was little changed at $24,917.4
Ether fell 0.2% to $1,635.01
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.81%
Germany’s 10-year yield advanced four basis points to 2.49%
Britain’s 10-year yield was little changed at 4.39%
Commodities
Brent crude rose 0.3% to $73.40 a barrel
Spot gold fell 0.5% to $1,933.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Sagarika Jaisinghani and Richard Henderson.
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2023-06-15 07:25:41Z
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