U.S. stocks pared gains on Wednesday after the Federal Reserve’s latest meeting minutes showed officials want more evidence of cooling inflation and favor further rate hikes into 2023. .
Wall Street’s benchmark S&P 500 index rose 0.8 percent and the tech-heavy Nasdaq Composite added 0.7 percent in a volatile session. The stock market was already 1% higher before the minutes were released.
Fed chair Jay Powell’s previous comment that the US central bank would slow the pace of rate hikes “is not indicative of any weakening in the committee’s resolve to achieve its stabilization target.” pricing or the perception that inflation is on a continuing downward trajectory”. ”, said participants of the December meeting, according to minute.
Investors also seized on economic data released on Wednesday that showed U.S. manufacturing activity contracted in December, the second straight month, bringing it to its lowest level since May 2018. 2020.
The report from the Institute of Supply Management also shows that price cuts paid by manufacturers accelerated last month.
“Nearly all of the current survey-based evidence indicates that, at best, a complete shutdown or a more likely one,” said Paul Ashworth, chief North American economist at Capital Economics. a shallow recession will soon begin.”
US job openings in November fell slightly from the previous month but exceeded forecasts, with nearly 10.5 million positions available, far more than the 10 million expected by economists.
U.S. government bonds rallied, with 10-year Treasury yields falling 0.09 percentage points to 3.69%. Bond prices increase when yields fall.
In terms of currencies, the US dollar fell 0.3% against a basket of six currencies, while the British pound gained 0.8% against the dollar and the euro gained 0.5% against the greenback.
“Minutes of the Fed December meeting were not in favor of the dollar, with officials acknowledging growing downside risks,” said Karl Schamotta, chief market strategist at Corpay.
Schamotta added that slowing inflation in EU countries like Germany and falling gas prices are pushing up sterling and the euro.
Warmer weather means European standards nature Air contract fell 10% to €62.75 per megawatt-hour – the lowest since late 2021. Brent crude oil prices also fell sharply, falling 4.3% to $77.84 a barrel.
In European equities, the region’s Stoxx Europe 600 index rose 1.4%, bringing the week’s gain to more than 3%. France’s 40 and Germany’s Dax rose 2.3% and 2.2%, respectively, the biggest single-day gain since early November. London’s FTSE 100 rose 0.4%.
The moves higher came in a week in which inflation figures for France, Germany and Spain fell short of expectations, fueling hopes that the pace of price growth has peaked across the eurozone. Data released on Wednesday showed France’s harmonized consumer price index rose 6.7% in the year to December, down from 7.1% in November.
Investors slashed their predictions for where the European Central Bank’s end-of-term policy rate could stabilize, with the market now expecting rates to peak at 3.3% in October. 7, down from 3.5%.
However, some investors may be ahead of themselves. Analysts at Rabobank warned: “Markets could continue to act too quickly to price in less aggressive policy action” from the ECB.
Asian stocks also rose on Wednesday, with Hong Kong’s Hang Seng up 3.2%. The index is up about 40% since early November. China’s CSI 300 index of shares listed in Shanghai and Shenzhen is up 0.1%.
