Global stocks slip after Fed signals tighter monetary policy

CureVac sinks as it fails in pivotal Covid-19 vaccine trial

CureVac was punished after its Covid vaccine trial failed.

CureVac was punished after its Covid vaccine trial failed.

 

Global stocks continued a steady descent from record highs reached earlier in the week and the dollar strengthened after the US central bank brought forward the anticipated timing of its first post-pandemic interest rate rise.

The FTSE All-World index of developed and emerging market stocks, which hit a closing record on Monday, headed for its third session of small losses on Thursday morning in London, dropping 0.5 per cent.

The Stoxx Europe 600 index, which rallied to an all-time high on Wednesday, fell 0.3 per cent in early trading the following session. Shares in European banks, which benefit from higher interest rates that enable lenders to make wider profit margins, opened 1.1 per cent higher. Shares in German pharma group CureVac sank 40 per cent after it failed in a key Covid-19 vaccine trial.

The Iseq was 0.16 per cent weaker by mid-morning.

Following its latest monthly meeting, the Federal Reserve said on Wednesday evening that most officials expected a rate rise in 2023, up from a previous projection of 2024.

Not roiled markets

The announcement has not roiled markets because “of an expectation that this will be happening at a time when the [global] economy is able to stand on its feet,” said Zehrid Osmani, manager of Martin Currie’s global portfolio trust.

Economists project US gross domestic product will grow about 10 per cent this year in a strong post-pandemic rebound for the world’s largest economy. US consumer price inflation hit 5 per cent in the 12 months to May.

“If there was not any expectation by the central bank of a rate rise in the next two years, there would actually be more to worry about,” Mr Osmani said. “We could be at risk of overheating or inflation getting out of control.” – Copyright The Financial Times Limited 2021