Bonds and Stocks Fall on Predictions that Warsh Will Lead the Fed – Europe Market Wrap

US stock futures sank alongside Treasuries as the White House prepared to name Kevin Warsh as the next Fed chair, a choice that investors view as less supportive of deep interest-rate reduction.

Gold fell 5% and the Dollar rose after a person familiar with the situation claimed the former Fed governor visited the White House on Thursday. The developments indicate that traders are backing off bets on policy easing under Warsh, who, as a policymaker from 2006 to 2011, frequently emphasised inflation risks while others concentrated on helping economy and jobs during the financial crisis.

Tighter monetary conditions would likely dampen growth prospects, cooling the stock market, whereas higher interest rates would weigh on bonds and boost the Dollar. Trump indicated he will unveil his choice on Friday.

S&P 500 futures fell 0.7%. The Dollar gained 0.4%, reversing losses as it headed for its worst month since June. The yield on 10-year Treasuries rose 2 bps to 4.26 percent. European stocks rose 0.4% as the Eurozone economy outperformed expectations at the end of last year.

Oil fell as risk-off sentiment spread through broader markets, yet Trump’s intensifying threats against Iran keep the market on edge. Brent traded around $70 a barrel on Friday, having surpassed that level in the previous session for the first time since July.