Asian shares slid on Thursday after a surprise interest rate hike by Bank of Canada brought back fears that U.S. rates could stay higher for longer and the Federal Reserve could remain hawkish when it meets next week.
The downbeat mood looked set to continue in Europe, with the Eurostoxx 50 futures off 0.30%, German DAX futures losing 0.31% and FTSE futures 0.06% lower.its overnight rate to a 22-year high of 4.75%, with traders expecting another increase next month to cool an overheating economy and stubbornly high inflation.The move from the BoC comes after Australia also stunned markets byinterest rates earlier this week.
Tapas Strickland, head of market economics at NAB, said the steps from BoC and RBA highlight that central banks aren't done with the hiking cycle. "Next week's U.S. CPI will be pivotal for whether the Fed goes in June, or skips as widely telegraphed."Markets are now pricing in a 64% chance of the Fed standing pat next week, compared with 78% just a day earlier, the CME FedWatch tool showed. Traders are pricing in a 25 basis point hike in July.
More than 90% of economists, 78 of 86, polled during June 2-7 said the Federal Open Market Committee would hold its federal funds rate at 5.00%-5.25%.
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