Global markets tumble on hawkish Fed fears and UK fiscal uncertainty
US stock selloffs extended into Friday as hawkish signals from the Federal Reserve pushed back interest rate cut expectations, causing Nasdaq 100 futures to tumble. UK assets were also pummeled after Chancellor Rachel Reeves dropped income tax hike plans, fueling uncertainty about the UK's fiscal outlook, while Bitcoin sank to a six-month low.
The selloff in US stocks extended into Friday as mounting fears of a hawkish pivot by the Federal Reserve fueled a retreat from risky assets. Concurrently, UK assets were significantly affected amid fresh uncertainty over Britain’s fiscal outlook.
Technology stocks were once again set to be at the forefront of the decline, with Nasdaq 100 futures slipping 0.6%. The gauge tumbled more than 2% in the previous session as mounting doubts over an interest-rate cut next month stirred fresh jitters about stretched valuations. Bitcoin sank to a six-month low. Treasuries also came under renewed pressure.
Federal Reserve officials’ cautious remarks on policy prospects prompted traders to scale back wagers on a December rate cut, with odds slipping below 50%. Less than a month ago, markets had all but priced in a quarter-point reduction.
UK gilts sold off sharply after Chancellor of the Exchequer Rachel Reeves dropped plans to raise headline income tax rates in the coming UK budget, prompting investors to question how she would make up for the revenue shortfall. The pound fell 0.5%, becoming the worst performer among major currencies against the dollar.
Traders also noted data showing China’s economic activity cooled more than expected at the start of the fourth quarter, with an unprecedented slump in investment and slower growth in industrial output.
Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux, commented: “The nervousness is palpable on markets and it stems from different corners... Any pushback from the Fed on interest rate cuts is bad news. If the Fed hasn’t enough data, they are likely not to cut.”
Key Market Moves (as of 8:27 a.m. London time):
-
Stocks: The Stoxx Europe 600 fell 0.9%; Nasdaq 100 futures fell 0.5%; The MSCI Asia Pacific Index fell 1.6%.
-
Currencies: The British pound fell 0.5% to $1.3123.
-
Cryptocurrencies: Bitcoin fell 1.9% to $96,843.76.
-
Bonds: Britain’s 10-year yield advanced 10 basis points to 4.54%; The yield on 10-year Treasuries advanced one basis point to 4.13%.
-
Commodities: Brent crude rose 1.4% to $63.89 a barrel.
