(Bloomberg) — European stocks fell and Wall Street equity futures were steady as investors weighed hawkish comments from Federal Reserve officials and looked toward the release of US inflation data due on Thursday for clarity on the trajectory for interest rates.
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The Stoxx Europe 600 Index dropped 0.7%, retreating from an eight-month high as retail and technology stocks led declines. Contracts on the S&P 500 and Nasdaq 100 pared earlier losses. Richard Branson’s Virgin Orbit Holdings Inc. tumbled in US premarket trading after a failed attempt to send Britain’s first satellites into orbit from its own soil.
Traders hoping for a quick end to aggressive rate hikes had a reality check on Monday, when San Francisco Fed president Mary Daly said she expects the central bank to raise rates to somewhere over 5%. Her Atlanta counterpart Raphael Bostic said policy makers should hike above 5% by early in the second quarter and then go on hold for “a long time.” Fed Chairman Jerome Powell speaks later at an event in Sweden.
“The same pattern keeps emerging, with investors clinging onto any data which appears to show the economy is cooling off, only to see their hopes dashed by policymakers who clearly believe the inflation-busting job is far from over,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The inflation report, which will come out almost a week after the latest jobs data showed wage growth has decelerated, will be among the last such readings Fed policy makers will see before their Jan. 31-Feb. 1 gathering.
The Bloomberg Dollar Spot Index was little changed, while Treasury 10-year yields crept higher to 3.55%.
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“There has been increasing hope of a softish landing for the US economy – that hope could be punctured if the Fed retains a hard line on rates,” said Russ Mould, investment director at AJ Bell. “All eyes will be on Fed chair Jerome Powell when he addresses a conference on central bank independence in Stockholm later. Inflation figures out on Thursday also represent…
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