Dollar bulls sink global stocks and commodities —Bitcoin, too, falters

From Tokyo to London, global stocks are in retreat as U.S. futures trade sideways, off earlier highs.

Since Wednesday’s bombshell announcement by the Federal Reserve, indicating a tightening of monetary policy earlier than previously assumed, stocks have been under pressure. On cue, short-dated Treasury yields and the dollar have rebounded—no surprise when the Fed turns more hawkish on interest rates.

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The greenback is up modestly this morning. That’s after a torrid stretch that’s seen the greenback climb in four of the last five sessions—a bad sign for big-cap stocks. Sure enough, the blue-chip Dow Jones Industrial Average is down for the week, and is edging lower in pre-market.

The strong dollar is also putting a lid on the commodities rally with crude and lumber in retreat.

And crypto? So far, the reflation trade hasn’t been kind to crypto coins. They’re slumping again today.

Here’s what else is happening in the global markets.

Asia

• The major Asia indexes are mixed in afternoon trading. The Hang Seng, the best of the bunch, is up 0.9%.

Europe

• The European bourses were trading lower at the start with the Stoxx Europe 600 down 0.2% in the first hour of trading. Travel and leisure stocks are the bright spot.
• The pound sterling is slumping as U.K. COVID cases spike. Dollar strength is also pushing cable lower.

U.S.

• U.S. futures are mixed this morning. The Dow and S&P are at risk of finishing the week in the red. The Nasdaq, though, looks likely to finish out the week higher.
• Over in the bond market, investors are watching the dramatic flattening of the 5-year-30-year yield curve. Such a move signals investors are less bullish on long-term debt. Stock markets don’t like when that happens.

Commodities and crypto

• Looks like gold bugs are buying on the dip. The shiny yellow metal is up 1%, trading around $1,800. As Jim Reid, Deutsche Bank’s markets guru, writes in an investor note this morning, “in a sign of how investors are recalibrating the risks, the traditional inflation hedge of gold (-2.10%) moved sharply lower for a second day running, which brings its losses over the last 2-days to -4.60%, thus marking its worst 2-day performance this calendar year.”
• The dollar is up a tick this morning after an impressive week. Its jump over the past two days is the biggest spike in the past three months. You can thank the Fed’s newfound hawkishness for that.
• Dollar strength is putting the pinch on most dollar-denominated commodities. On cue, crude is down again with Brent trading below $73/barrel.
• Finally, we move to crypto. At 5 am ET, Bitcoin was down a further 3.9%. Ethereum was faring even worse. Since the Fed revealed on Wednesday that interest rate hikes are indeed on the cards, Bitcoin is off nearly 10%, dashing, for now, the argument it’s this wondrous new hedge against inflation.