European stocks may succumb to heavy selling pressure on Thursday, with a hawkish Fed decision, heightened geopolitical risks and concerns over elevated oil prices likely to weigh on sentiment.
The dollar index rose to a level last seen on Nov. 22 and the yield on the 10-year Treasury note rose to 1.8566 percent from 1.846 percent after the Federal Reserve confirmed the very hawkish expectations of the market.
The U.S. central bank signaled its first rate hike since 2018 will happen “soon.”
Asset purchases are likely to halt in March while the process of balance sheet reduction will commence after it has begun raising rates.
Meanwhile, the United States is “ready either way” in handling the escalating Ukraine crisis, U.S. Secretary of State Antony Blinken told reporters as the Biden administration’s top envoy delivered a written response to Russia, laying out a serious diplomatic path forward and rejecting some of Russia’s key demands.
Asian markets followed Wall Street lower, while oil prices fell in Asian trade after a 2 percent gain in the previous session amid the Russia-Ukraine tensions and worries over tight energy market supply.
Surging global crude oil prices spell trouble for the global economy as it could further fan inflation.
Gold, generally seen as an inflationary edge, held steady in Asian trade after having fallen the most in two months.
It’s another quiet day ahead on the Eurozone’s economic calendar, with German consumer sentiment figures likely to be in focus.
Across the Atlantic, trading may be impacted by reaction to reports on weekly jobless claims, durable goods orders and fourth quarter GDP.
On the earnings front, Intel Corp, the world’s largest chipmaker, posted record fourth-quarter revenue, but forecast first-quarter earnings short of Wall Street expectations.
Electric carmaker Tesla closed 2021 on a high note but warned that the chip shortage is still an issue.
Home appliance firm Whirlpool reported fourth quarter earnings that beat analysts’ forecasts while revenue fell short of expectations.
Comcast, McDonald’s and Southwest Airlines are among the companies due to report their results before the start of trading later in the day.
Overnight, U.S. stocks erased early gains to end mostly lower and Treasury yields spiked after the Fed indicated that it plans to begin raising interest rates “soon,” citing elevated inflation and a strong labor market.
The tech-heavy Nasdaq Composite surged as much as 3.4 percent before ending marginally higher.
The Dow and the S&P 500 slipped 0.4 percent and 0.2 percent, respectively as Fed Chair Powell backed a March liftoff and said he won’t rule out a hike every meeting.
He described the current inflation situation as “slightly worse” than in December.
European stocks rose sharply on Wednesday as investors awaited the latest Fed decision. Sentiment was underpinned after Microsoft forecast revenue for the current quarter broadly ahead of Wall Street targets.
The pan European Stoxx 600 advanced 1.7 percent. The German DAX surged 2.2 percent, France’s CAC 40 index climbed 2.1 percent and the U.K.’s FTSE 100 added 1.3 percent.
Market Analysis
European Shares Set For Steep Selloff
2022-01-27 05:35:13
