As Fed Rate-Cut Bets Rebound, Stocks Drop – Europe Market Wrap

Global equities slumped after Powell signalled that the Fed was not in a hurry to lower interest rates, and concern grew about the composition of Trump’s cabinet.

Europe’s Stoxx 600 index fell 0.3%, on track for its fourth weekly decrease, with the pharmaceutical industry among the biggest stragglers, after Trump appointed a prominent vaccine sceptic to a major health-policy position. Vaccine makers Sanofi, GSK, and AstraZeneca all slumped following the announcement.

US market futures hinted to a second day of falls on Wall Street, with Nasdaq 100 contracts falling 0.9%.

The S&P 500 has already lost approximately one-third of its trough-to-peak gains since the US presidential election, as some of the optimism about corporate growth under Trump evaporates. There is also a recognition that interest rates will fall more slowly than expected, with recent data indicating that inflation pressures remain elevated and Powell confirming that the Fed will ease policy gradually.

Powell’s words have reduced the likelihood of a December rate drop to less than 60%, down from above 80% the day before. Yields on two-year Treasury bonds stabilised after rising in the previous session in reaction.