Hawkish Fed comments, new Russia sanctions

LONDON – European markets inched lower on Wednesday against a backdrop of hawkish comments from US Federal Reserve officials and further sanctions against Russia.

The pan-European Stoxx 600 slipped 0.3% in early trade, with autos shedding 0.9% to lead losses while food and beverage stocks nudged 0.3% higher.

Fed Governor Lael Brainard said during a Minneapolis Fed webinar on Tuesday night that the central bank will need to reduce its balance sheet quickly and continue to increase interest rates at a steady pace in order to contain surging inflation. The comments sent major US averages lower and the 10-year Treasury yield to a new 2022 high.

San Francisco Fed President Mary Daly then told the Native American Finance Officers Association that inflation running at a 40-year high is “as harmful as not having a job” and assured the group that the Fed is ready to act.

Global investors are also awaiting details of fresh international sanctions against Russia after allegations emerged of civilian killings in Ukrainian towns now recaptured from Russian forces. The European Commission on Tuesday proposed banning Russian coal as part of its next round of sanctions.

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US stock futures were flat in early premarket trade as investors stateside await the release of the Fed’s Tuesday meeting minutes, hoping for further details about the Federal Open Market Committee’s plan to reduce the central bank’s balance sheet.

Shares in Asia-Pacific declined on Wednesday, tracking overnight losses on Wall Street with Chinese tech stocks in Hong Kong falling sharply.

UBS holds its annual general meeting on Wednesday while on the data front, the euro zone’s construction PMI readings for March and February retail sales are due.

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