Stocks falter as sentiment falls on rate fears and yields rise

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NEW YORK, June 8 (Reuters) – European stocks fell and U.S. equities faltered on Wednesday as the prospect of a rate hike dampened sentiment, while bond yields rose after the zone’s gross domestic product The euro beat expectations, adding to bets of a more hawkish European Central Bank.

Trading was choppy as investors awaited Thursday’s ECB meeting and Friday’s U.S. consumer price data that will highlight the dilemma investors face as they juggle the degree of policy tightening. central bank policy and its impact on inflation.

Investors are worried about the economic outlook and its effect on earnings. Citi Research analysts have warned that Intel Corp (INTC.O) may announce weaker-than-expected second-quarter earnings ahead of schedule. Intel shares fell 4.1%.

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Target (TGT.N) rattled markets on Tuesday when the retailer cut its profit margin forecast after reporting a much steeper drop in quarterly earnings in May than expected. Other companies will follow and challenge the second quarter results, said Philip Orlando, chief equity market strategist at Federated Hermes.

“The market is turning around here and will re-bottom this 3800 level that we saw in early May over the next couple of months, and it could drop a bit below,” he said. He called the recent rebound rally a dead cat.

The pan-European STOXX 600 index (.STOXX) lost 0.67% while the MSCI gauge of stocks across the world (.MIWD00000PUS) lost 0.02%.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell 0.25%, the S&P 500 (.SPX) lost 0.22% and the Nasdaq Composite (.IXIC) added 0.21%.

Data showed the eurozone economy grew much faster in the first quarter of this year than in the previous three months, despite the war in Ukraine, the European Union’s statistics office said. , as it revised earlier estimates upwards. Read more

Investors increased their bets on ECB rate hikes and money markets forecast 75 basis points of rate hikes in September.

ECB rate hike bets

US Treasury yields rose after GDP data beat expectations, adding to bets of a more hawkish ECB.

The yield on 10-year Treasury bills rose 3.5 basis points to 3.005%.

The euro hit a seven-year high against the yen, moving from an upward revision to Q1 growth. The euro rose 0.33% to $1.0734, while the dollar index fell 0.068%.

The dollar slid against a basket of major currencies for a second straight day, but still managed to hit a new 20-year high against the yen. The yen weakened to 134.47 to the dollar, its lowest level since February 27, 2002.

The Organization for Economic Co-operation and Development cut its growth outlook to 3% this year from its forecast of 4.5% in December and raised its inflation estimate – although it said it there was a limited risk of “stagflation”. Read more

Asian stocks strengthened overnight, with Chinese stocks enjoying some relief from the easing of COVID-19 restrictions, but sentiment was volatile and European indices fell soon after the open. Read more

The Japanese economy contracted slightly less than initially forecast in the first quarter as private consumption remained resilient and businesses rebuilt their inventories. Read more

German industrial production recovered but rose less than expected in April. Read more

Oil prices rose about 1% as U.S. crude hit a 13-week high despite rising domestic crude inventories as supplies looked likely to tighten with China easing lockdowns and workers Norwegian tankers planning to strike.

U.S. crude rose 1.53% to $121.24 a barrel and Brent to $122.63, up 1.71% on the day.

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Reporting by Elizabeth Howcroft, additional reporting by Sujata Rao, editing by William Maclean and Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

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