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Top 5 Things to Know in the Market on Thursday

EconomyMar 22, 2018 05:52AM ET
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© Reuters. Top 5 things to know today in financial markets - Here are the top five things you need to know in financial markets on Thursday, March 22:

1. Global Stocks Wobble As Fed, Trade Jitters Weigh

Global equities were on the back foot, as traders assessed the implications of higher borrowing costs in the U.S., while persistent worries about a global trade war kept markets on edge.

Asian markets closed mostly lower, with bourses in the region giving up early gains to close in negative territory.

Chinese markets led losses in the region after the People's Bank of China raised the interest rate on seven-day reverse repurchase agreements, a key short-term interest rate, by 5 basis points, in response to the Fed's move overnight.

The rate increase was the PBOC's first major policy decision under new Governor Yi Gang, who was appointed by parliament on Monday.

Elsewhere, in Europe, the pan-European Stoxx 600 index, the region's broadest measure of share prices, was down 0.4% in mid-morning trade to hit their lowest level in two weeks, with all sectors and major bourses in the red.

Meanwhile, on Wall Street, U.S. stock futures pointed to significant losses at the open.

The blue-chip Dow futures slumped 160 points, or around 0.6%, the S&P 500 futures dropped 19 points, or about 0.7%, while the tech-heavy Nasdaq 100 futures lost 76 points, or roughly 1.1%.

2. Dollar Sags To 1-Month Low As Fed Sticks To Current Rate Outlook

The dollar fell to one-month lows against a currency basket, after the Federal Reserve raised interest rates, but stuck to its forecast for two more hikes this year.

Some investors had expected the Fed to project three more rate hikes this year so the decision to stick to its forecast for two additional hikes was seen by some as less hawkish than expected.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.2% to 89.12, its lowest level since February 19. The index fell 0.74% on Wednesday, its largest one-day decline since mid-January.

In the bond market, the U.S. 10-year Treasury yield declined 6.2 basis points to 2.845%, after reaching 2.936% a day earlier.

3. Attention Now Shifts To The Bank of England

With the Fed out of the way, attention now shifts to the Bank of England's policy meeting.

The BoE will announce its rate decision at 1200GMT (8:00AM ET), and while it is not expected to hike rates or make any changes to the size of its asset purchase program, investors will be looking for clues regarding the timing of its next hike.

Robust British wage data on Wednesday cemented expectations that the central bank will raise rates as early as May.

Sterling edged higher, with GBP/USD rising 0.2% to 1.4165, after hitting its highest since Feb. 2 at 1.4181 earlier.

4. Trump Set For China Tariff Announcement

President Donald Trump is expected to announce tariffs targeting $60 billion of Chinese imports, in a move aimed at curbing theft of U.S. technology that is likely to trigger retaliation from Beijing and stoke fears of a global trade war.

Trump will sign a memorandum "targeting China's economic aggression" at 12:30PM ET (1630GMT), which will be imposed under Section 301 of the 1974 U.S. Trade Act.

U.S. Trade Representative Robert Lighthizer said on Wednesday the tariffs would target China's high-technology sector and could also include restrictions on Chinese investment in the United States.

Investors worry such a move could trigger countermeasures by China, possibly causing a vicious cycle of escalating retaliation.

According to several sources, China is already preparing to retaliate with tariffs of their own focused on U.S. exports of soybeans, sorghum and live hogs.

Investors were also eyeing a European Council meeting, with the European Union aiming to secure an exemption from U.S. tariffs on steel and aluminum imports set to come into force on Friday.

5. Euro Zone Private Sector Output Loses Momentum

Euro zone businesses rounded off the first quarter of 2018 with their slowest growth in over a year, much weaker than expected, as new business took another hit from a stubbornly strong euro, a survey showed.

IHS Markit's composite flash PMI for the euro zone, seen as a good guide to economic health, slumped to 55.3 this month, far below forecasts for a more modest dip to 56.7 from February's final reading of 57.1.

The slowdown could be widespread, with earlier data from Germany showing growth in Europe's largest economy slowed much faster than analysts had expected. A sister PMI suggested France's expansion rate had also weakened.

The euro was little changed at 1.2340 against the dollar.

Top 5 Things to Know in the Market on Thursday

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