Title: Stocks fall as central bankers say inflation outlook not improving

Aug 18, 2022 05:06AM ET

By: AnalysisWatch

European stocks dropped on Thursday, tracking falls on Wall Street after Federal Reserve officials said in policy meeting minutes that inflation pressures were not easing and a European Central Bank official warned the outlook had not improved.

By 0835 GMT, the Euro STOXX was down 0.13%, while Wall Street futures pointed to a weaker open after the main indexes closed lower..

Stocks have staged a strong rebound in the past two months on hopes a peak in the pace of monetary tightening is within sight, but they remain vulnerable to central banker warnings that the fight against price pressures is far from over.

Federal Reserve officials saw "little evidence" late last month that U.S. inflation pressures were easing, according to the minutes of their July 26-27 policy meeting released on Wednesday.

ECB board member Isabel Schnabel told Reuters in an interview that the euro zone inflation outlook had not improved since a July rate hike, suggesting she favoured another large interest rate increase next month even as recession risks harden.

The latest central banks to hike were the Reserve Bank of New Zealand on Wednesday and the Norwegian bank on Thursday, both raising rates by 50 basis points.

The dollar rose towards a three week high after the Fed's minutes. The euro slipped 0.1% to $1.0168 while the pound fell back below $1.20.

Investors need to hedge urgently - the environment which has led to this bear market rally, which we concede we did not see being as strong as it has been, is about to change.

The yield on the benchmark 10-year Treasury notes rose initially in Asian trade but later retreated to 2.884%.

The two-year yield, which rises with traders' expectations of higher Fed funds rates, was unchanged at 3.287%.

U.S. crude ticked up 0.3% to $88.41 a barrel. Brent crude rose 0.5% to $94.15 per barrel.

Spot gold inched up 0.2% to $1764.93 per ounce.