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(Bloomberg) — U.S. stock index futures and European shares fell after the Federal Reserve played down expectations for a recession and said interest rates would be on hold for longer.

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Contracts on the S&P 500 and Nasdaq 100 indices were down at least 0.9%. Amid a wave of rate hikes from Taiwan to Norway, demand for haven assets lifted the dollar and the Swiss franc. The British pound extended losses after an expected half-point rate hike by the Bank of England. The exchange rate of the euro decreased before the decision of the European Central Bank. Tesla Inc. fell in early New York trading after Elon Musk sold $3.6 billion in shares.

A global rally fueled by softer-than-forecast U.S. inflation came to a screeching halt on Wednesday after policymakers signaled a much-higher-than-market-expected rate peak and sought to dampen hopes for rate cuts next year. Chairman Jerome Powell reiterated that the central bank will not back down from its fight against inflation, despite growing fears of job losses and recession.

“The Fed was more hawkish than markets expected,” Jack McIntyre, money manager at Brandywine Global Investment Management, wrote in a note. “They still appear to want financial markets to tighten further, which essentially means they want lower stock prices.”

The dollar strength index hit its biggest gain since Dec. 5. The euro fell from a six-month high as the ECB was expected to follow the Fed by hiking by half a point. The pound extended its losses after London policymakers made the expected hike, but there were growing disagreements over their decision.

The Swiss franc held on to gains after the country’s central bank doubled interest rates to 1% as forecast. China’s yuan fell as poor economic data and a rise in Covid cases weighed on it.

Europe’s benchmark Stoxx 600 fell the most on a closing basis since Oct. 7. Tesla fell 1.7% in early New York trading after Chief Executive Officer Musk sold nearly 22 million shares in the electric car maker for $3.58 billion. Western Digital Corp. lost 4.8% as Goldman Sachs Group Inc. advised the stock to sell.

Shorter-dated Treasury yields edged higher, with the two-year rate up 1 basis point. The 10-year yield was little changed as investors weighed the economic impact of the Fed’s rampage.

Oil fluctuated between gains and losses after rising nearly 9% over the previous three sessions as TC Energy Corp. restarted a section of the Keystone pipeline, allowing some flows to resume through the main pipeline.

This week’s main events:

  • ECB rate decision and ECB President Lagarde’s briefing, Thursday

  • Rating Decisions UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan Thursday

  • US Cross-Border Investment, Business Inventories, Empire Manufacturing, Retail Sales, Initial Jobless Claims, Industrial Production, Thursday

  • Eurozone S&P Global PMI, CPI, Friday

Some major movements in the markets.


  • S&P 500 futures were down 0.9% as of 7:01 a.m. New York time.

  • Nasdaq 100 futures were down 1.2%

  • Dow Jones Industrial Average futures were down 0.7%

  • The Stoxx Europe 600 fell 1%

  • The MSCI World index fell 0.5%


  • The Bloomberg Dollar Spot Index rose 0.6%

  • The euro fell 0.6% to $1.0619

  • The British pound was down 0.9% at $1.2314

  • The Japanese yen fell by 0.8% to 136.59 per dollar.


  • Bitcoin down 0.6% to $17,722.3

  • Ether fell by 1.5% to $1,290.5


  • The 10-year Treasury yield fell one basis point to 3.46%

  • Germany’s 10-year yield was little changed at 1.95%

  • UK 10-year yields fell nine basis points to 3.23%


  • West Texas Intermediate crude was little changed

  • Gold futures were down 1.7% at $1,788.40 an ounce.

This story was produced with the help of Bloomberg Automation.

– With assistance from Richard Henderson and Georgina McKay.

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