Financial business

Stocks fall, weighed down by Fed meeting, Omicron worries

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NEW YORK – Global stocks edged lower on Wednesday, coming under pressure as investors waited to see how the Federal Reserve eases the nearly four-decade high inflation and steers its move toward interest rates.

Analysts have pointed to the uncertainty created by Omicron, which they consider a wild card in the equation, as the full impact of the new variant of the coronavirus is not yet clear.

The gauge of MSCI stocks across the world fell 0.30%.

The Dow Jones Industrial Average lost 87.55 points, or 0.25%, to 35,456.63, the S&P 500 lost 12.85 points, or 0.28%, to 4,621.24 and the Nasdaq Composite lost lost 95.01 points, or 0.62%, to 15,142.63.

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“Caution is again evident in the equity markets as we await the Fed’s final rate decision for the year,” said Craig Erlam, senior equity analyst at OANDA.

At 2:00 p.m. EST / 1900 GMT, the Fed is expected to announce that it is accelerating the end of its pandemic-era bond purchases and signaling a turn towards higher interest rates next year in order to hedge against against inflation to highs of nearly four decades.

“Central banks have no choice but to start tightening monetary policy in the majority of cases as inflation continues to rise to uncomfortable levels, generalizes and shows signs of becoming more permanent “said Erlam.

“Omicron, which poses a greater threat and imposes restrictions, may delay the inevitable, but not for long, as policymakers cannot afford to be complacent. “

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Markets expect at least two increases in 2022 on the Fed’s dot plot showing where policymakers are looking at borrowing costs.

The 10-year US Treasury yields were at 1.4394%, well below a recent high of 1.693%. The yield curve continued its flattening trend, with investors betting that an earlier start to Fed tightening will lead to a slowdown in inflation in the long run.

Inflation is also a problem elsewhere, with UK consumer price inflation hitting its highest level in more than 10 years in November at 5.1%, beating all economists’ forecasts ahead of a rate-setting meeting of the Bank of England on Thursday.

Investors have sharply increased their bets as the BoE is about to raise rates.

“All eyes are on the Fed, but the UK inflation data is an absolute disaster for the Bank of England – for all intents and purposes it should raise rates, but the problem is Omicron and the uncertainty that surrounds it. surrounds it, ”said Michael Hewson, chief market analyst at CMC Markets.

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“How is the Fed handling the message this afternoon? Too hawkish and that could drive stocks down, ”Hewson said.

The European Central Bank is also meeting on Thursday and is expected to scale down the stimulus one step further, but will promise significant support for next year, sticking to its long-held view that alarming inflation will subside from herself.

The pan-European STOXX 600 index rose 0.12%.

CRUDE OIL

Asian stocks were weaker, with the MSCI’s largest Asia-Pacific stock index outside of Japan declining 0.81% in slow trading.

Chinese blue chips fell 0.9% as coronavirus restrictions negatively impacted retail sales in November, although industrial production improved.

The prospect of a short-term rate hike has supported the US dollar, particularly against the euro and the yen where monetary policy is expected to lag.

The dollar index rose 0.012% and the euro by 0.03% to $ 1.126.

The risk of rising spot rates weighed heavily on gold, which offers no fixed yield, and left it sidelined at $ 1,768.81 an ounce.

Oil prices have fallen after the International Energy Agency said the spread of the Omicron coronavirus variant would hurt the recovery in global fuel demand.

US crude was down 1.15% to $ 69.92 a barrel and Brent was at $ 72.97, down 0.99% on the day.

(Additional reporting by Sujata Rao and Saikat Chatterjee; Editing by Alexander Smith, Alexandra Hudson and Jane Merriman)

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