Receive free Markets updates
We’ll send you a myFT Daily Digest email rounding up the latest Markets news every morning.
Wall Street futures fell on Thursday as investors fretted over the prospect of US interest rates staying higher for longer, ahead of speeches by a string of Federal Reserve policymakers.
Contracts tracking Wall Street’s benchmark S&P 500 fell 0.3 per cent, while those tracking the technology-focused Nasdaq 100 declined 0.7 per cent ahead of the New York open.
The falls followed a survey on Wednesday showing that the US service sector unexpectedly expanded in August, as consumers continued to spend despite the federal funds rate having climbed to a 22-year high. The news added to investor doubts about when the Federal Reserve would begin to cut interest rates.
The data bolstered the belief that “even if the Fed is done with its rate hikes, it may need to hold its key interest rate for longer than previously expected if the economy continues to be this strong,” according to Karl Steiner, chief quantitative strategist at SEB Research. Traders will now be watching comments from several Fed policymakers due to speak later in the day.
The dollar, which tends to rise when investors expect higher US rates, added 0.1 per cent against a basket of six currencies on Thursday, remaining near its highest level since March.
European stocks, meanwhile, reversed early losses on Thursday following six straight sessions of falls, as investors moved into defensive sectors amid fears of a looming global economic slowdown.
The region-wide Stoxx Europe 600 index, which earlier in the day was on track for its longest losing streak in more than five years, erased losses to trade flat by lunchtime. France’s Cac 40 added 0.3 per cent and Germany’s Dax advanced 0.1 per cent.
The region’s markets were buoyed by the utilities and healthcare sectors, which were up 0.9 per cent and 0.5 per cent respectively, as they tend to be less sensitive to the economic cycle and are perceived as offering investors more security in a downturn.
A string of bleak economic data from Europe and China has raised traders’ fears that the global economy is slowing as a result of high interest rates and weakening demand. Data on Thursday showed German industrial production falling more than expected.
China’s CSI 300 fell 1.4 per cent and Hong Kong’s Hang Seng lost 1.3 per cent after fresh data on Thursday showed trade was weakening in the world’s second-largest economy.
The figures showed Chinese exports falling 8.8 per cent year on year in August, while imports declined 7.3 per cent in a sign that demand was slowing domestically and abroad.
“Periods of sticky inflation have dented real wages in western economies, while elevated levels of interest rates have reduced their purchasing power via higher debt servicing costs,” said Kelvin Lam, senior China economist at Pantheon Macroeconomics.
“This, coupled with the fizzling out of the post-Covid spending spree, [is] resulting in weak demand for discretionary Chinese goods,” he added.
Oil prices edged lower, as worries about slowing demand in China — the world’s top importer of the fossil fuel — overshadowed an earlier announcement of supply cuts by Saudi Arabia and Russia.
Brent crude fell 0.5 per cent to trade at $90.17 a barrel, although it remains near its highest level this year, while the US equivalent West Texas Intermediate dropped 0.6 per cent to $87.02 a barrel.
Read the full article here