The Federal Reserve could raise interest rates more quickly and aggressively than expected
Wall Street stocks plunged on Tuesday as 10-year Treasury yields hit fresh two-year highs amid the ongoing speculations surrounding the Federal Reserve that could raise interest rates more quickly and aggressively than expected. The S&P 500 slid 1.8%, the Dow Jones Industrial Average shed 1.5%, and the Nasdaq Composite retreated 2.6%. In individual stocks, Microsoft Corp. fell 2.43% after the company unveiled a $69 billion deal for Activision Blizzard Inc. Goldman Sachs missed expectations for its fourth-quarter earnings, sending its shares 7% lower.
Following suit, Asian equities saw another bearish session on Wednesday, with the MSCI Inc.’s Asia-Pacific share index falling for a fifth consecutive session. China’s Shanghai Composite fell 0.33% despite the central bank having pledged to use more monetary policy tools to aid the economy. Japan’s Nikkei 225 plunged 2.80%, leading the losses in the region, while Australia’s S&P/ASX 200 index fell 1%.
In Europe, stock markets opened in the negative territory after a sell-off on Wall Street on Tuesday. The pan-European Stoxx 600 dropped 0.2% in early deals. U.S. stock index futures were steady in early pre-market trading. On the data front, the UK inflation hit an annual 5.4%, its highest since March 1992, versus 5.2% expected. The FTSE 100 has settled just below the flat-line following the report.
Meanwhile, the dollar retreated marginally after a rally witnessed yesterday amid rising Treasury yields. EURUSD is now back below the 20-DMA, with the 1.1350 zone representing the immediate upside target for the pair. Should the pressure reemerge anytime soon, the common currency may threaten the 1.1300 support for the first time since January 10.