European stocks were steady on Friday after minutes from the Federal Reserve’s latest policy meeting showed a “substantial majority” of officials think the pace of interest rate rises should slow in the months ahead.
The regional Stoxx Europe 600, which has risen more than 9 per cent in the past month, was flat in early trading, while London’s FTSE lost 0.1 per cent.
US markets are closed for Thanksgiving on Thursday, with Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq Composite having ended the previous session 0.6 per cent and 1 per cent higher, respectively.
Minutes from the Fed’s November meeting, at which the central bank raised its main policy rate by 0.75 percentage points for the fourth time in a row, suggested that while a majority of officials were committed to slowing down the pace of interest rate rises soon, some worried that inflation had shown “little sign thus far of abating”.
Still the minutes, released on Wednesday, revealed officials believed their aggressive tightening campaign had begun to bear fruit. “Financial conditions had tightened significantly in response to the Committee’s policy actions, and their effects were clearly evident in the most interest rate-sensitive sectors of the economy,” the minutes showed.
The Fed was “primed, ready, anxious, to slow the pace of hiking because they still believe they can slow inflation without creating a recession and increasing unemployment,” said Steven Blitz, chief US economist at TS Lombard, who nevertheless expected a 0.75 percentage point point rise in December. The Fed “will rue the day if they don’t,” he added.
The US inflation rate inched lower in October, with annual price growth slowing to 7.7 per cent to hit its lowest level since January. The data sparked a rally in equity markets, although some investors, worried that interest rates will remain stubbornly high for much of next year, doubt how long it has left to run.
Data released earlier on Wednesday showed that business activity in the eurozone contracted for the fifth consecutive month, according to S&P Global’s flash eurozone composite purchasing managers’ index.
The survey of businesses recorded falling factory output, declining new orders and slowing employment growth, but also a sliver of good news: supply constraints eased, as did cost pressures, and companies reported a more upbeat view about the year ahead, easing fears of a deep recession next year.
Asian equities rose on Thursday morning, following the US higher, as investors looked past China’s rising Covid-19 caseload. Hong Kong’s Hang Seng index rose 0.7 per cent, Japan’s Topix added 1.2 per cent and China’s CSI 300 fell 0.4 per cent.