Global Markets Fretted Over Fed’s Plans to Keep Hikes Throughout 2023 albeit at Lower Pace

Major averages hit their lows of the session after Federal Reserve Chairman Jerome Powell signaled more data was needed before the central bank would meaningfully change its view of inflation. The Dow fell as much as 404.47 points, after climbing 287.01 points earlier in the day. “The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path,” said Powell.

The Fed delivered a widely anticipated 50 basis point rate hike at the conclusion of its December policy meeting. It's a smaller bump from the prior four consecutive rate hikes of 75 basis points. The so-called “dot plot” of the members’ median long-term forecasts showed rates would reach 5.1% at the end of 2023, 0.5 percentage points above what they had projected in September. The first reduction in rates wouldn’t likely occur until 2024, when rates would drop to 4.1%.

Tech stocks, which are less attractive when borrowing costs rise, stumbled. Shares of Apple (AAPL), Cisco Systems (CSCO), IBM (IBM), Intel (INTC), and Salesforce (CRM) fell. The selloff in Tesla (TSLA) shares continued. Financials also mostly declined. American Express (AXP) shares dipped 2%. Shares of AT&T (T) and Comcast (CMCSA) also dropped.

Bitcoin (BTCUSD), which joined a sharp rise in crypto assets a day ago and showed an instant hike by about $500 to $18,300, suddenly stumbled and returned to $17,700. The BTC chart looks like a bear broke into a bullfeast and ruined everything inside. What happened? The source of sadness is yesterday's FOMC meeting and its rhetoric, as it was the case for the majority of other risk-on assets. Meanwhile, Binance CEO Changpeng Zhao tweeted that the withdrawal volume the company encountered yesterday “was not the highest it’s seen, not even top 5,” and that now deposits are coming in. Zhao indicated Binance stopped withdrawals of the USD coin (USDC) for 8 hours Tuesday because it needed to do “token swaps” through banks in New York that weren’t open yet.

Meanwhile, European equities fell on the continent and in the UK, extending a decline in Asian and U.S. markets, ahead of the European Central Bank (ECB) and the Bank of England's (BoE) respective decisions on interest rates. The Norwegian central bank, Norges Bank, announced its decision to raise its policy rate by 25 basis points to 2.75%. The bank stressed that it will "likely" raise the rate further, based on its current assessment of the outlook and balance of risks.

As of 10:50 a.m., the German DAX declined by 0.98% as Deutsche Post AG (DPW.DE) dipped by 3.12%. The British FTSE 100 dropped by 0.71%, with Associated British Foods PLC (ABF.L) shedding 3.16%. The French CAC 40 decreased by 1.12% as Kering SA (KER.PA) slumped by 5.04%.

The euro lost 0.59% to the dollar concurrently to sell for $1.06158. At the same time, the pound sterling decreased by 0.76% against the greenback to $1.23317.

Earlier today, most Asian markets also posted considerable declines. China’s economic activity worsened in November before the government abruptly dropped its notorious Zero Covid policy. The worse-than-expected data on retail sales and industrial production in China added to the negative sentiment, with the spike of recorded positive-Covid cases spreading across the country.

Japan's Nikkei 225 dropped by 0.37% and Australia's S&P/ASX 200 edged down by 0.64% at the closing bell. The Shanghai Composite was down by 0.24%, while the Shenzhen Composite moved up by 0.16% at the close. South Korean Kospi slumped by 1.60%, while Hong Kong's Hang Seng plunged by 1.55% at the same time.