US stock futures were lower on Friday, while the dollar rose and oil prices fell as investors worried that rising inflation in Europe, weakening growth in China and higher Fed interest rates would reverse the recent rally in global equities.
A calm look at the minutes of the Fed’s July policy meeting, which brought stocks to a firmer close on Thursday, has been challenged by a range of Fed policymakers amid improving job market data and the overall outperformance of the US economy versus the US economy. its global competitors.
St. Louis Fed President James Bullard told the Wall Street Journal he didn’t see the need to “drag rate hikes into next year” as he argued for faster and bigger rate hikes that would cost the Fed Funds. at the end of December to a range of 3.75% to 4%.
That was largely confirmed by Mary Daly, president of the San Francisco Fed, who said a 75 basis point rate hike next month could be a “reasonable” response to inflation and employment data.
“We need to get the rate at least to neutral — that’s about 3% — but probably too restrictive territory,” which she described as “a little above 3% this year and a little more above 3% next year” during an interview with CNN International.
The CME Group’s FedWatch now indicates a 45.5% chance of a 75 basis point rate hike on Sept. 21, up from 41% in yesterday’s trading.
The comments, set against worrisome inflation levels in Europe, where prices rose 8.9% last month to a two-decade high, reminded investors that the post-pandemic economy faces numerous challenges.
One such challenge remains China, where officials have now warned of an impending drought, adding to a list of problems in the world’s second-largest economy that has sparked rumors of a rate cut by the Peoples’ Bank of China. .
The Chinese yuan was fixed at its lowest level in two years against the US dollar, while the dollar index rose 0.2% to trade at 107,690 against a basket of six global peers.
Benchmark yields on 10-year bonds, moving in the opposite direction to prices, rose 6 basis points from yesterday to 2.945%, while 2-year bonds were stuck at 3.261%
European equities fell lower after a disturbing reading of factory inflation in Germany, the region’s largest economy, driven in part by a 105% year-on-year increase in energy input prices. The European Stoxx 600 benchmark fell 0.32% during afternoon trading in Frankfurt, following a 0.48% decline for the region-wide MSCI ex-Japan index in Asia.
On Wall Street, futures pegged to the S&P 500 point to a 32-point drop in the opening bubble, while those on the Dow Jones Industrial Average are priced at a 240-point slump. Futures linked to the tech-focused Nasdaq point to a 140-point drop.
In pre-market trading, Bed, Bath & Beyond (BBBY) shares plunged more than 40% after Securities and Exchange Commission filings late Thursday indicated that Ryan Cohen, the retailer’s second-largest shareholder, had completely exited his nearly 12% stake in the group.
Deere & Co (THE) Shares fell 3.52% after the farm equipment maker posted a worse-than-expected third-quarter profit and lowered its full-year profit forecast amid continued supply chain pressure.
Applied materials (AMAT) shares rose slightly after the semiconductor device maker posted better-than-expected third-quarter results and a solid, but cautious, near-term outlook.
DIY store (HD) Shares were also in the spotlight after the hardware store retailer unveiled a new $15 billion share repurchase program, kept the dividend in place and appointed new CEO Ted Decker as group chairman after stronger-than-expected second-quarter gains earlier this week.