Investors slump ahead of Fed minutes, fears of euro zone recession grow

  • Fed minutes expected
  • American Thanksgiving holiday on Thursday
  • Stocks post weak gains globally
  • Eurozone economic data point to recession
  • China hit by rising COVID-19 infections

LONDON, Nov 23 (Reuters) – Global stocks were little changed on Wednesday as investors kept their eyes peeled for the minutes of a Federal Reserve meeting that could shed light on whether the U.S. central bank was considering moderating interest rate hikes.

The Fed raised rates significantly in an effort to curb rising inflation, and New Zealand central bank previously raised interest rates by a record 75 basis points to 4.25%, a harbinger of more likely hikes from the Federal Reserve, European Central Bank and bank of england next month.

“We expect the Fed to be probably closer to the end of the rate hike cycle than the beginning, certainly since the rate hikes are largely behind them,” said analyst Mike Hewson. Chief Markets Officer at CMC Markets.

“There’s very little interest heading into Thanksgiving weekend, and as a result markets are drifting more on inertia. If you’ve made your money this year, you most likely have,” said said Hewson.

US markets are closed Thursday for Thanksgiving. Minutes from the Fed’s November meeting are due out on Wednesday.

The MSCI All Country Stock Index (.MIWD00000PUS) rose 0.12%, although it was still down about 18% for the year.

In Europe, the STOXX (.STOXX) the 600-company index rose 0.1%, leaving around 10% for 2022. US stock futures, the S&P 500 e-minis, were slightly firmer.

David Bizer, managing partner at investment manager Global Customized Wealth, said investors were being guided by what they thought the Fed would do next as signs of a slowing U.S. economy grew.

“The overall market appreciation in the fourth quarter is driven by this belief that the Fed is waking up to the fact that the pace and magnitude of its rate hikes could have a near-term conclusion. This gives markets reassurance that this is going to be the end,” Bizer said.

On the corporate news front, the shares of Swiss credit (CSGN.S) fell nearly 6% after the bank said it expected to make a pre-tax loss of up to 1.5 billion Swiss francs in the fourth quarter.

The slowdown of euro area trade activity fell slightly in November, but aggregate demand continued to fall as consumers cut spending amid a crisis in the cost of living, the data showed, adding to evidence that the currency bloc is entering a recession.

In China, the authorities imposed restriction to curb a rapid rise in COVID-19 infections, heightening investor concerns about the world’s second-largest economy.

Reuters Charts

COVID RESTRICTIONS

MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) rose 0.5%, boosted by overnight gains in US equities. The index is up 12% so far this month.

Hong Kong Hang Seng Index (.HSI) rose 0.6%, while China’s CSI300 index (.CSI300) gained 0.1%.

“The biggest story for investors in Asia remains the reopening of China,” said Suresh Tantia, senior investment strategist at Credit Suisse in Singapore.

“We had seen Chinese markets climb up to 20%, but those expectations are lowered, we believe a reopening will be a slower process and not rushed.”

China reported 29,157 new COVID infections for Nov. 22 on Wednesday, up from 28,127 new cases a day earlier. The number of cases in Beijing and Shanghai is rising steadily and remains high in several major manufacturing and export hubs, prompting authorities close some facilities.

The benchmark 10-year Treasury yield traded at 3.7483% from its US close of 3.758% on Tuesday.

The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, touched 4.5269% from a US close of 4.517%.

Ahead of the Fed minutes, the dollar index, which tracks the greenback against a basket of currencies from other major trading partners, rose 0.019%.

The euro single currency was also slightly firmer on the day at $1.0312.

“The US dollar has lost some of its recent gains (as) central bankers’ consensus on the magnitude of interest rate hikes unravels,” wrote Commonwealth Bank analyst Tobin Gorey.

Oil prices thumb up as data showed a bigger-than-expected drop in U.S. crude last year, outweighing concerns about falling fuel demand from China.

U.S. crude rose 0.8% to $81.59 a barrel, while Brent crude gained 1% to $89.23 a barrel.

Spot gold was trading at $1,737 an ounce, down 0.16% on the day.

While the FTX Exchange Collapse continues to rock the cryptocurrency markets, Bitcoin rose 2.5% to $16,547.

Reporting by Scott Murdoch in Sydney and Huw Jones in London; Editing by Kenneth Maxwell and Kim Coghill and Miral Fahmy

Our standards: The Thomson Reuters Trust Principles.

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