European stocks fell at the open on Thursday as investors looked ahead to the release of crucial economic data that help determine if the Federal Reserve will combat lingering inflation with faster and higher interest rate rises.
The region-wide Stoxx 600 fell 0.4 per cent, the German Dax 0.1 per cent, and the French Cac 40 0.4 per cent. London’s FTSE 100 lost 0.6 per cent.
At a two-day hearing in Washington, Federal Reserve chair Jay Powell said that the US central bank was willing to return to more aggressive interest rate rises but stressed that “no decision” had been made yet.
Stock and bond markets have begun to price in a half percentage point increase in March but are awaiting critical economic data like Friday’s non-farm payrolls numbers, which will reveal if the economy has started to cool.
In January, 517,000 jobs were unexpectedly created, spurring investor concern about the extent of rate hikes and hawkish rhetoric from the Federal Reserve.
“Good macro news equals terrible market news,” said Florian Ielpo, head of macro and multi-asset portfolio manager at Lombard Odier Investment Managers. He added that a high reading will “confirm that more is needed to curb dynamism in the labour market. The reason we saw big numbers last month was because of service job creation which is slower to react than industry. When it will is hard to say.”
US futures contracts for the blue-chip S&P 500 slipped by 0.3 per cent, while those tracking the Nasdaq fell 0.5 per cent.
Yields on two-year US Treasuries, which are more sensitive to monetary policy, fell 0.02 percentage points to 5 per cent, while 10-year notes rose 0.01 percentage points to 3.99 per cent. Yields on 10-year German Bunds rose 0.05 percentage points to 2.68 per cent.
The dollar index, which measures the greenback against a basket of six peer currencies fell 0.2 per cent.
In Asia markets were muted, with Hong Kong’s Hang Seng index falling by 0.6 per cent and China’s CSI 300 dropping 0.4 per cent. This followed weaker than expected Chinese inflation data, with consumer prices up 1 per cent and producer prices down 1.4 per cent — its lowest reading since November 2020.
In commodities, Brent crude fell 0.3 per cent to $82.40 while WTI, the US equivalent, was down 0.4 per cent to $76.37.