Global Stocks Fall, Crude Rebounds As Markets Brace For Higher Rates

Global Stocks Fall, Crude Rebounds As Markets Brace For Higher Rates

By Chibuike Oguh

NEW YORK (Reuters) – Global equities were lower while crude oil edged up as traders braced for higher interest rates after economic data that continues to show the strength of the U.S. economy and validates the Federal Reserve’s tight monetary policy stance.

A U.S. Labor Department report on Thursday showed that new claims for unemployment benefits unexpectedly fell last week, pointing to a persistently tight labor market.

The readings for the fourth-quarter personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, was revised upward to 3.7%, indicating that inflation was much stronger than initially thought and helping to drive bearish sentiments among traders.

Minutes of the Federal Reserve’s last meeting released on Wednesday had showed that officials favored a moderation in the pace of rate hikes although they indicated that containing high inflation would be the “key factor” in how much further rates need to rise.

“The Fed minutes yesterday were a bit hawkish and they said ongoing rate hikes would be necessary and that should obviously be negative for the market,” said Sandy Villere, portfolio manager at Villere & Co in New Orleans.

The MSCI world equity index, which tracks shares in 50 countries, was down 0.42%. European stocks were up at just 0.06%.

On Wall Street, the Nasdaq erased earlier gains from better-than-expected revenue at chipmaker Nvidia Corp. The results drove the company’s shares up 13%, as well as shares of other semiconductor manufacturers.

The Dow Jones Industrial Average fell 0.68% to 32,821.76, the S&P 500 lost 0.46% to 3,972.81 and the Nasdaq Composite dropped 0.53% to 11,445.78.

“The market is becoming a stock-pickers market where if companies are putting out good numbers, they’re being rewarded even now that interest rates are going higher,” Villere added.

Oil prices firmed more than 1% before paring some gains, with Russian supply curbs partially offsetting an expected rise in U.S. inventories.

Brent crude futures rose 1.53%, to $82.83 a barrel, while West Texas Intermediate crude futures (WTI) advanced 1.49% to $75.05 after six sessions of losses.

(Additional reporting by Dhara Ranasinghe, editing by Shounak Dasgupta, Susan Fenton and Anna Driver)