US stocks fall and dollar appreciates as rate hike worries return

The dollar strengthened against its peers and US stocks were steady on Monday as investors turned cautious about the pace of rate hikes by the Federal Reserve, following comments from senior central bank officials.

Wall Street’s benchmark S&P 500 traded flat and the tech-heavy Nasdaq Composite slipped 0.1 percent as investors paused after a rally late last week prompted by better-than-expected inflation data.

The S&P index gained 6.4 percent on Thursday and Friday and the Nasdaq Composite climbed 9.3 percent, the biggest two-day gain since 2008.

The moves came after annual US consumer price growth slowed to 7.7 percent in October, less than the 8 percent expected by economists. The result eases pressure on the Fed to raise its main interest rate by 0.75 percentage points at its next meeting in December, after making four such hikes in a row in an aggressive campaign to tame historically high inflation rates.

Over the weekend, Mary Daly, president of the Fed’s San Francisco branch, warned that the next phase of policy making would be “difficult”.

“You have to be aware of the cumulative tightening that’s already in the system. You have to pay attention to the delays in monetary policy,” Daly told the Financial Times. “You need to be aware of the risks that exist throughout the global economy and the enormous uncertainty we have, even about how inflation will evolve.”

Fed Governor Chris Waller said Monday morning at a UBS conference in Australia that rates would “keep going up” and “stay high for a while until we see that inflation getting closer to our target.”

In government bond markets, the US two-year Treasury yield rose 0.08 percentage point to 4.4%, while the benchmark 10-year Treasury note yield rose 0.04 percentage point to 3.87%. Yields rise when prices fall.

The dollar index, which tracks the currency against six others, rose 0.5 percent, erasing some of its losses over the past week.

In Europe, the regional Stoxx Europe 600 index gained 0.1 percent, consolidating a rise of more than 3 percent last week. The London FTSE gained 0.9 percent.

The German Dax rose by 0.6 percent and has now gained a fifth since its September low. Data released on Monday showed that industrial production in the euro zone rose 0.9 percent in September, faster than the 0.3 percent increase economists had forecast.

Shares of China-related real estate stocks soared after Beijing pivoted to support China’s debt-ridden real estate sector and eased its long-standing zero-Covid policy.

The Hang Seng Mainland Properties Index even rose by 13.7 percent. Hong Kong-listed Country Garden, China’s largest developer, surged 45 percent.

Hong Kong’s broader Hang Seng index closed 1.7 percent, trimming gains after rising as much as 3.9 percent. China’s CSI 300 closed 0.2 percent higher. Japan’s Topix lost 1 percent and South Korea’s Kospi 0.3 percent.

https://www.ft.com/content/ef5e2813-4923-47d4-92d3-5307504152e9 US stocks fall and dollar appreciates as rate hike worries return

Adam Bradshaw

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