United States
US equities extended their selloff for a second day on Wednesday as investors braced for more aggressive tightening from the Federal Reserve. The Dow Jones industrial average fell 0.4 percent, the S&P 500 lost 1.0 percent and the NASDAQ dropped 2.2 percent.
Growth and momentum stocks suffered the most, as they did on Tuesday, in a broad selloff. Most declines occurred ahead of the 2 p.m. (1800 GMT) release of the latest Federal Open Market Committee minutes, which confirmed policy-makers were inclined to raise rates aggressively at their March 15-16 meeting, and would allow the bank's balance sheet to run off rapidly, though not as rapidly as the market feared after a series of hawkish Fed comments earlier in the week.
The members "generally agreed" to reduce Treasury note holdings by $60 billion per month and mortgage bond holdings by $35 billion, phased in over a period of three months or modestly longer "if market conditions warrant." The minutes also said "many participants," noting inflationary risks to the upside, "would have preferred a 50 basis point increase in the target range for the federal funds rate" at the latest meeting, and that "many participants" noted that one or more 50 basis point increases in the target range "could be appropriate at future meetings."
Worst sectors included the FANMAG group, Chinese technology, autos & parts, travel & leisure, homebuilders, chipmakers, software, and airlines. On the positive side, energy stocks outperformed on early oil price strength, but they faded as oil fell back late in the day. Pharma, managed care, and consumer staples outperformed too.
Among stocks in focus, JetBlue dropped 8.7 percent amid fallout from its bid for its rival, Spirit Airlines, down 2.4 percent. Avis Budget declined 11 percent after a downgrade at Bank of America.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$3.00 to US$101.90 while spot gold rose US$5.85 to US$1,926.01. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose 4 basis points to 2.62 percent and the 10-year note yield rose 4 basis points to 2.60 percent.
Europe
Worries about faster Federal Reserve tightening alongside new sanctions against Russia depressed equities. The Europe-wide STOXX 600 lost 1.5 percent, the German DAX declined 1.9 percent, the French CAC dropped 2.2 percent and the UK FTSE 100 was down 0.3 percent.
Markets focused on Tuesday's hawkish comments from Fed Governor Lael Brainard, who spoke of the need for faster reduction in the size of the Fed's balance sheet, and the prospect of aggressive rate increases, which echoed comments from other Fed officials and raised new concern ahead of the release of the minutes of the Fed's most recent policy meeting. Separately, a proposed European Union ban on Russian coal weighed on risk appetite as it was expected to drive up European energy costs further.
Another bearish factor was a big miss in German manufacturers' orders, with a decline of 2.2 percent in February, well below expectations for a decline of 0.2 percent.
Among sectors, travel & leisure, technology, and autos & parts lagged the most while health care, utilities, and construction & materials outperformed.
Asia Pacific
Asia-Pacific equities weakened as a selloff in US growth stocks weighed on sentiment, along with the threat of more sanctions against Russia and worries about the Federal Reserve's policy plans.
Hong Kong lagged greater China as its Hang Seng index dropped 1.9 percent with internet and technology stocks off the most. Mainland China stocks were mixed, with financials and real estate better while tech weakened. China's CSI 300 declined 0.3 percent and the Shanghai index was unchanged.
Japanese equities tracked the NASDAQ lower, with investors reacting negatively to comments from Fed Governor Lael Brainard, who spoke of the need for faster reduction in the size of the Fed's balance sheet, and the prospect of aggressive rate increases. Japan's Nikkei 225 dropped 1.6 percent and the TOPIX declined 1.3 percent with nearly all sectors lower. Marine shipping stocks were notable decliners, with Nippon Yusen off 5.2 percent and Mitsui O.S.K. down 5.3 percent.
The South Korean KOSPI lost 0.9 percent and the Taiwan Taiex fell 0.6 percent with tech stocks lagging. The Indian BSE Sensex fell 0.9 percent.
Australian equities retreated as investors anticipated a more hawkish stance from the Federal Reserve in the Federal Open Market Committee policy meeting minutes to be released on Wednesday afternoon in the US. The All Ordinaries index declined 0.6 percent. Weakest sectors were information technology, materials, and consumer discretionary. Holding up best were financials, consumer staples, and energy.
Looking ahead*
In Asia/Pacific, Australian goods & services trade figures are due. In Europe, reports on Swiss unemployment, German industrial production, UK Halifax house prices, Eurozone retail sales, and ECB meeting minutes are due. In North America, the US jobless claims and US consumer credit reports are on tap.
