European stocks and US futures fall ahead of interest rate decision

European stocks and US futures fell on Monday as central banks on both sides of the Atlantic are about to raise interest rates to their highest levels since the global financial crisis.

The region-wide Stox Europe 600 showed Germany’s fourth-quarter gross domestic product (GDP) surprisingly up, just as Spain’s inflation rose by 5.5% to 5.8% in the year to January. It traded 0.5% lower after the latest data showed it had fallen 0.2%. % of Dec. The euro gained 0.3% against the dollar and the 10-year German bund yield rose 0.06 points to 2.3%. Bond yields move inversely with prices.

Contracts tracking Wall Street blue chip S&P 500 and tech-heavy Nasdaq 100 fell 0.9% and 1.2% respectively before the New York open. The UK FTSE 100 traded flat mid-session.

The move comes ahead of policy meetings at the Federal Reserve, European Central Bank and Bank of England this week. Investors expect the Fed to slow the pace of monetary tightening to his 0.25 percentage point and raise interest rates to his highest level since September 2007. Meanwhile, the BoE and ECB are widely expected to raise interest rates by half a percentage point to their highest level since the autumn. 2008.

Nonetheless, softening inflation in Europe and the US has raised expectations that interest rates will be nearing a peak, with some investors predicting rate cuts later this year. But central bank officials are set to resist such calls when answering questions later this week.

MUFG currency analyst Lee Herdman said investors are likely to “continue to consider the Fed’s more hawkish policy guidance.” “I am not convinced that the Fed will be able to trigger a significant hawkish repricing in the market,” he said.

Optimism that global growth will not be as weak as previously feared, fueled by falling European energy prices and China’s abrupt withdrawal of coronavirus measures in place since early 2020 has strengthened and the stock market has risen so far this year. Increasing consumer spending — exactly what central banks determined to keep inflation down are trying to stop.

ING analysts say financial conditions have eased further with a weaker dollar, lower government bond yields and tighter credit spreads.may weaken [the Fed’s] Current actions in the fight against inflation”.

A key question for the BoE, on the other hand, is whether they are aware that their work is nearly complete. Analysts said they “would likely leave options open,” adding that market expectations for an ECB rate cut in 2024 were “premature.”

In Asia, Hong Kong’s Hang Seng Index fell 2.7%, dragged down by a 6% decline in Alibaba. China’s CSI 300 rose about 0.5%. European stocks and US futures fall ahead of interest rate decision

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