European stocks expect worst week since November on Fed hawkish comments

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The DAX chart of the German stock price index is pictured on the stock exchange in Frankfurt, Germany, September 5, 2018. REUTERS/Staff/File Photo

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  • European stocks down, stocks also fell in Asia
  • Falls follow signals from U.S. Fed policymakers
  • The US dollar falls for the fourth consecutive day

LONDON, Jan 14 (Reuters) – European stocks tumbled on Friday, with the STOXX 600 set for its biggest weekly loss since November, and Wall Street futures pointed to a mixed open in the U.S. as expectations investors firmed on the start of rate hikes in the United States. in March.

Asian stocks fell after Fed Governor Lael Brainard became the latest and longest serving US central banker to signal that the US Federal Reserve will hike rates in March. Read more

Other Fed officials also showed their willingness to raise rates, after data this week showed US consumer prices jumped 7% year-on-year. Read more

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The shift in risk aversion continued in European trading, with the STOXX 600 down 0.6% on the day at 11:51 GMT, after losing 0.7% for the week as a whole (. STOXX).

The French CAC 40 and the German DAX were also down 0.6% (.FCHI), (.GDAXI) while the UK FTSE 100 was down just 0.1% (.FTSE). Tech stocks were on course for their second consecutive weekly decline as investors shifted from growth stocks to value stocks.

The MSCI World Equity Index (.MIWD00000PUS), which tracks stocks from 50 countries, fell 0.3%.

Wall Street was set for a mixed open with S&P 500 futures slightly higher but Nasdaq futures lower.

“It is clearly the impact of tighter monetary policy that is being felt in the markets here,” said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors.

“Why should I buy expensive low-profit growth stocks when the central bank begins to tighten monetary policy?”

Paillat, who expects at least four rate hikes from the Fed this year, said it was “almost done” for the tightening cycle to begin in March.

“What matters in the next few days will be more revenue,” he added. “There is still some room for earnings to surprise on the upside.”

The dollar fell for a fourth straight day, hitting a two-month low as investors took advantage of long bets on the dollar. At 11:56 GMT, the dollar index was at 94.827 and was on track for a weekly decline of 1% – its biggest since May last year. Read more

The euro was stable at $1.1454.

The 10-year US Treasury yield rose to around 1.74%, but was still below the two-year highs it hit on Monday.

Yields on European government bonds rose by around 1-2 basis points, after generally falling this week, as investors sought safer assets.

The European bond market was calm in the face of a possible government reshuffle in Italy and ahead of the French elections in April. Read more

Meanwhile, the yield on five-year Japanese government bonds rose to its highest level since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers would debate when to could begin a possible rise in interest rates.

Such a move could come before inflation even hits the bank’s 2% target, sources said. Read more

Market reaction eased in European trading, with the dollar down about 0.2% against the yen to 113.885 at 1159 GMT.

The pound rose 0.1% against the dollar to $1.372.

GDP data showed Britain’s economy grew faster than expected in November and output eventually rose above its level before the country entered its first COVID-19 lockdown. Read more

Oil futures were a little higher, reversing recent losses, helped by US dollar weakness. Read more

Bitcoin was little changed around $42,000, having rallied somewhat since slipping below $40,000 earlier this week. The cryptocurrency has lost around 38% of its value since hitting an all-time high of $69,000 in March.

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Reporting by Elizabeth Howcroft, editing by Timothy Heritage and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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