European stocks and U.S. equity futures experienced marginal losses following hawkish comments from the Federal Reserve regarding the direction of its interest rate policy. This comes as investors await the release of U.S. inflation data on Thursday.
Despite investors’ hopes for an impending end to the Federal Reserve’s aggressive rate hikes aimed at cooling inflation, San Francisco Fed president Mary Daly stated on Monday that she expects the central bank to continue its current approach. According to Daly, the Fed may raise rates to the region of over 5%.
Following Daly’s announcement, the Stoxx Europe 600 Index lost 0.7%, thereby retreating from its eight-month high as construction and retail led the decline. Futures listed on the S&P 500 and Nasdaq 100 both fell by about 0.2%. The Bloomberg Dollar Spot Index remained largely unchanged, while treasury 10-year yields gained 3.55%.
While fears surrounding an impending U.S. and European recession are sustained, investor confidence has been fractionally restored due to renewed confidence in China. Following its government’s decision to dial back on its strict Covid restrictions and implement market-friendly decisions, China’s economy is projected to grow by 4.8% in 2023.