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Global shares fall as hawkish Fed signals continue to echo across financial markets

Adam Morgan McCarthy   

Global shares fall as hawkish Fed signals continue to echo across financial markets
  • Shares were down in Europe and Asia Friday following hawkish comments from Federal Reserve officials.
  • Altcoins led a crypto rebound, after Tesla said it would accept dogecoin to pay for merchandise.

Global shares eased on Friday, following a slew of hawkish comment from Federal Reserve officials, while cryptocurrencies recovered more ground, led by gains in dogecoin after electric vehicle maker Tesla said it would accept some payments using the meme token.

Lael Brainard, the prospective deputy Fed chair, echoed the hawkish sentiment her colleagues led with earlier in the week in her confirmation hearing to the Senate, while San Francisco Fed president Mary Daly separately told Reuters in an interview that a March rate hike was "quite reasonable."

A 39-year high inflation print on Wednesday underscored investors' belief that the Fed will have to raise rates at least three this year to relieve growing price pressures, if not more.

US stock futures were relatively flat on Friday, with S&P 500 futures gaining 0.1% in early trading while the Dow Jones and the Nasdaq 100 lost 0.64% and 0.12% respectively. The MSCI All-World index was last down 0.3% on the day, reflecting weakness in European and Asian markets.

In Europe the Stoxx 600 was down for the second week, its worst trading week since November last year, declining 0.6%. European markets were in line with Asia, where the MSCI Asia index was down around 0.7%

New GDP data released Friday showed the UK economy was now bigger than before the pandemic. Rapid economic growth of 0.9% in November put the UK economy 0.7% above pre-pandemic peak in February 2020, according to the Office for National Statistics.

"But before we all start popping the champagne corks, there is the obvious missing elephant in the room here – that of Omicron," Charles Hepworth, investment director at GAM Investments said.

"With many workers being forced to isolate due to the explosive case growth we have witnessed in the UK, December and January's monthly GDP prints will be severely impacted. Couple that with higher taxes and energy costs later next quarter and the consumer outlook is far from rosy," he said.

In the cryptocurrency market, dogecoin soared, leading the charge higher, after Elon Musk announced that Tesla will accept the token as a payment method for merchandise. Dogecoin was last up 9.8% over the past 24 hours at $0.1883, around its highest in a month.

Injecting another element of caution was the start of the fourth-quarter earnings season, which kicks off on Friday with results from JPMorgan.

Some analysts are cautious about the potential for nasty surprises in this next crop of earnings reports, given the volatility of Covid cases and the labor shortage. But others were more upbeat.

Guilaume Paillat, multi-asset portfolio manager at Aviva Investors is focusing on earnings and the potential for upside: "There's still a bit of room for earnings to surprise to the upside."Covid cases are slowing down in some US cities where the Omicron variant is showing signs of peaking according to an unlikely data source that could lead to more optimistic outlook in the long term.


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