The close: North American stock markets falter as sentiment wanes amid rate fears

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North American and European equities fell on Wednesday as the outlook for a rate hike dampened sentiment, while bond yields rose after eurozone gross domestic product beat expectations, adding to bets on the future. a more hawkish European Central Bank.

Trading was choppy as investors awaited Thursday’s ECB meeting and Friday’s U.S. consumer price data that will highlight the dilemma investors face as they juggle the degree of policy tightening. central bank policy and its impact on inflation.

The White House said it expected headline inflation to be “high” on Friday. Economists expect annual inflation of 8.3%, according to a Reuters poll.

Investors are worried about the economic outlook and its effect on earnings. Citi Research analysts have warned that Intel Corp may announce weaker-than-expected second-quarter earnings ahead of schedule. Intel shares fell 5.3%.

Target rattled markets on Tuesday when the retailer slashed its profit margin forecast after reporting a much steeper decline in quarterly earnings in May than expected. Other companies will follow and challenge the second quarter results, said Philip Orlando, chief equity market strategist at Federated Hermes.

“The market is turning around here and will re-bottom that 3,800 level that we saw in early May over the next couple of months, and it could drop a bit below,” he said. He called the recent rebound rally a dead cat.

In Toronto, the S&P/TSX Composite Index closed down 135.78 points, or 0.65%, at 20,792.43.

Healthcare and industrials stocks led the declines, falling 2.1% and 1.6% respectively. The heavyweight Energy sector ended up 0.7%.

On Wall Street, according to preliminary data, the S&P 500 lost 45.18 points, or 1.09%, to end at 4,115.50 points, while the Nasdaq Composite lost 90.15 points, or 0.74. %, at 12,085.09. The Dow Jones Industrial Average fell 273.57 points, or 0.82%, to 32,906.57.

People looking for the peak inflation narrative continue to get punched in the face every day as the energy rises,” said Thomas Hayes, managing member of Great Hill Capital LLC in New York.

The pan-European STOXX 600 index closed 0.57% lower as growth concerns weighed on bank stocks, while the MSCI gauge of stocks across the world lost 0.64%.

Data showed the eurozone economy grew much faster in the first quarter of this year than in the previous three months, despite the war in Ukraine, the European Union’s statistics office said. , as it revised earlier estimates upwards.

Investors increased their bets on ECB rate hikes and money markets forecast 75 basis points of rate hikes in September.

Yields on German and US Treasuries rose after eurozone GDP data beat expectations, adding to bets of a more hawkish ECB.

The yield on 10-year Treasury bills rose 6.1 basis points to 3.031%.

The German 10-year rate, the benchmark for the euro zone, reached a new high since 2014 at 1.368%.

The Organization for Economic Co-operation and Development has cut its growth outlook to 3% this year from 4.5% forecast in December. The OECD also raised its inflation estimates, although it said there was limited risk of “stagflation”.

The euro hit a seven-year high against the yen, moving from an upward revision to Q1 growth. Against the dollar, the euro gained 0.15% to $1.0715.

The dollar index rose 0.107% and managed to hit a new 20-year high against the yen. The yen weakened to 134.47 to the dollar, its lowest level since February 27, 2002.

Asian stocks strengthened overnight, with Chinese stocks enjoying some relief from the easing of COVID-19 restrictions, but sentiment was volatile and European indices fell soon after the open.

The Japanese economy contracted slightly less than initially forecast in the first quarter as private consumption remained resilient and businesses rebuilt their inventories.

Oil prices rose about 1% as U.S. crude hit a 13-week high despite rising domestic crude inventories as supplies looked likely to tighten with China easing lockdowns and workers Norwegian tankers planning to strike.

U.S. crude futures rose $2.70 to settle at $122.11 a barrel and Brent rose $3.01 at $123.58 a barrel.

Gold edged higher in choppy trading as concerns over economic growth boosted the metal’s appeal as a safe haven.

US gold futures rose 0.2% to $1,856.50.

Bitcoin fell 2.94% to $30,200.98.

Reuters

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