European Shares May Follow Wall Street Lower On Fed Worries

(RTTNews) – European stocks may come under selling pressure on Wednesday amid worries about rate hikes and rising geopolitical tensions.

With Federal officials hinting at further policy tightening, investors are pricing in the federal funds rate climbing to around 5.3 percent in June.

The Fed is scheduled to release the minutes of its latest monetary policy meeting later today, which could shed additional light on the outlook for interest rates.

Geopolitical tensions are on the rise, with Russia suspending its participation in the strategic offensive arms treaty and U.S. President Joe Biden proclaiming “unwavering” support for the defense of Ukraine and Nato’s eastern flank.

Asian markets followed Wall Street lower while the dollar and yields remained elevated underpinned by expectations that the Federal Reserve may keep rates at an elevated level for an extended period.

Gold traded flat while oil prices fell slightly on uncertainty about the demand outlook.

U.S. stocks fell the most in two months overnight and yields on 10-year Treasuries hit three-month peak amid ongoing worries about interest rates and gloomy forecasts from retailers Home Depot and Walmart.

Strong business activity data following recent robust data on retail sales, the labor market and manufacturing production led investors to anticipate higher rates for longer.

The Dow tumbled 2.1 percent and the S&P 500 shed 2 percent to hit their lowest closing levels in a month, while the tech-heavy Nasdaq Composite plunged 2.5 percent.

European stocks finished with modest losses on Tuesday as investors reacted to disappointing manufacturing activity from the Eurozone’s two largest economies.

The pan-European STOXX 600 eased 0.2 percent. The German DAX and the U.K.’s FTSE 100 both slipped around half a percent while France’s CAC 40 index shed 0.4 percent.