Premarket: World stocks drop as central banks meet after ‘higher for longer’ Fed view

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Market jitters return after the U.S. central bank delivered a hawkish message on the direction of interest rates in the new year

Global shares slid for a second day on Thursday as major central banks deliver their final policy decisions of the year, with the U.S. Federal Reserve signalling that it expected interest rates to stay higher for longer.

Hot on the heels of the Swiss, the Norges Bank raised rates by a quarter-point to 2.75% and indicated it has not finished tightening monetary policy. Global stocks have risen by nearly 13% this quarter, marking their strongest quarterly performance for two years, based on the assumption that inflation is gradually subsiding and soon the Fed will indicate it does not need to rapidly raise rates.

The U.S. dollar, which has lost almost 7% in value in the fourth quarter, rose 0.5%, steering clear of this week’s six-month lows despite a dip in Treasury yields that would normally depress the currency. French luxury retailer LVMH, which is highly exposed to the Chinese economy, was the biggest negative weight, down nearly 2%, while Dutch semiconductor manufacturer ASML fell 1.5%.Rising COVID-19 infections and disappointing economic data in China also eroded investor confidence, prompting a decline in crude oil following Wednesday’s rally.

“In essence, the market is still of the view that inflation heads towards target in 2023,” Chris Weston, head of research at Pepperstone, wrote in a client note. “The likely result in a potential standoff between the Fed and the markets is volatility.”Sterling dropped 0.9% to $1.2314, still close to six-month highs.

 

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Inflation steals all the wealth of citizens so that corrupt governments like Trudeau’s …who respect no ethical behaviour …can dole it out to their friends.

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