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U.S. Opening Bell: Futures, Stocks Slip As Fed Confirms Tightening; Dollar Surges

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Fed sticks to its hawkish guns
Korean KOSPI falls into bear market territory
Bitcoin remains in the red

Key Events

Global stocks and US futures contracts on the Dow Jones, S&P 500, NASDAQ and Russell 2000 all slid in trading on Thursday ahead of the US open after the Federal Reserve, yesterday, failed to backpedal on its recent hawkish tilt and instead repeated its inflation warnings.

In the wake of its recent strong performance, oil appears to be taking a breather.

Global Financial Affairs

Investors who were expecting the Fed chief, Jerome Powell, to use vagueness to avoid an adverse market reaction were disappointed. The central bank head asserted that he would not refrain from consecutive rate increases in the war against inflation, showcasing a level of resolve markets hadn’t seen before.

The STOXX 600 Index sank today, dropping 1.5% at the open. But the pan-European index trimmed losses to 0.5% in 45 minutes. Travel and technology suffered the greatest tumbles just one day after leading a rally.

STOXX 600 Daily

Via the chart, it’s clear there’s a volatility struggle taking place around the 200 DMA, which has been falling after aligning with the uptrend line since the March 2020 bottom.

The UK’s FTSE 100 recovered, erasing a 1.14% loss earlier in the session.

France’s STMicroelectronics (PA:STM) advanced over 4% after the chipmaker unveiled plans to double its investments in 2022, supported by rising demand that caused its earnings to beat estimates.

Germany’s SAP (DE:SAPG) dropped over 6% despite posting strong results, after the software firm announced it agreed to buy a majority stake in private US fintech firm Taulia.

Deutsche Bank (DE:DBKGn) rallied 6% after posting its largest profit since 2011, beating forecasts for losses. The beat was fueled by strong revenue gains at its investment banking arm during a deal-making boom.

Earlier, the Asia session was bright red. South Korea’s KOSPI plummeted 3.5%, underperforming the region, as traders contended with local challenges on top of repricing higher interest rates. A new law designed to protect workers from disasters in the workplace put many corporates on the defensive, with some large construction companies closing work sites to avoid the risk of being made an example. In addition, North Korea conducted a missile test, thought to be its sixth this month.

The KOSPI extended the downside breakout of a year-long H&S top.

KOSPI Daily

The Korean index extended the downturn since the July peak to 20.9%, entering a bear market.

In Japan, the Nikkei 225 dropped 3.11%, making it the second-worst performer in the region. The sell-off stretch the benchmark’s decline since the mid-September high to almost 15%.

Nikkei Daily

The gauge completed a year-long top.

On Wednesday, US stocks wiped out gains and yields surged after the Fed announcement. But the yield on the 10-year Treasury note eased after touching its highest level since December 2019.

The dollar bounced to retest the Nov. 24 peak, the highest level since July 3, 2020.

Dollar Index Daily

To extend the uptrend, the price must post a new high—and we’re banking that it will—after having blown a bearish descending triangle.

Gold plunged for a second day.

Gold Daily

The yellow metal is falling below a triangle but remains within a recent rising channel. We expect the price will break through its bottom.

Bitcoin‘s slide continued.

Bitcoin Daily

Technically, BTC may have completed a rising flag, bearish in a downturn.

Oil was struggling at a 7-year high, fluctuating at yesterday’s close. Traders will be closely watching next week’s OPEC+ meeting to see if the group decides rising prices mean it should alter its production policy.

Up Ahead

On Friday, Europe’s largest economy, Germany announces GDP figures.
US core PCE price index is published on Friday.
Michigan consumer sentiment data is released on Friday.

Market Moves

Stocks

The STOXX 600 fell 1.1% as of 8:32 a.m. London time
Futures on the S&P 500 fell 0.8%
Futures on the NASDAQ 100 fell 0.7%
Futures on the Dow Jones Industrial Average fell 0.7%
The MSCI Asia Pacific Index fell 2.4%
The MSCI Emerging Markets Index fell 1.7%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.7% to $1.1162
The Japanese yen rose 0.5% to 115.21 per dollar
The offshore yuan fell 0.6% to 6.3737 per dollar
The British pound fell 0.5% to $1.3388

Bonds

The yield on 10-year Treasuries declined three basis points to 1.84%
Germany’s 10-year yield advanced four basis points to -0.03%
Britain’s 10-year yield rose five basis points to 1.25%

Commodities

Brent crude rose 0.99% to 89.62
Spot gold fell 0.4% to $1,811.70 an ounce

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