US, Europe markets fall in early trading as possibility of rate hike in Fed meeting looms large

The anticipation of the Federal Reserve increasing rates loomed large over the US and European markets as they slid significantly in early trading on Tuesday. While the Dow Jones Industrial Average lost 576 points, or 1.7 per cent, the S&P 500 slid 1.7 per cent, and the Nasdaq Composite was down 1.3 per cent.

In Europe, Stoxx Europe 600 was down 1.2 per cent by 4 PM London time. 

The Fed's two-day meeting opens Tuesday with a strong possibility of the rate hike.

The fall of the Dow was mainly triggered by the slide of small and large banks, a day after JPMorgan Chase purchased the troubled Republic Bank. Regional banks such as PacWest and Western Alliance had to stop trading after their shares tumbled more than 20 per cent.  

JPMorgan Chase, meanwhile, dropped 1 per cent, to perform worse than a day ago, when its share had risen above 2 per cent in early trading on Monday morning.

Other giant banks such as Bank of America, Goldman Sachs, and Citigroup were also on the losing side as they saw a fall of more than 2.5 per cent.   

In the two-day FED meeting, it is expected that the central bank will increase the rate by 25 basis points.

CME Group’s FedWatch tool says traders are predicting that there is a 97 per cent chance of a rate hike.

However, traders will also keep a close watch on whether the Fed keeps rates steady, or tightens monetary policy. 

An important factor in the fall of the US market on Tuesday was also a statement from Treasury Secretary Janet Yellen, who said that the US might hit the debt ceiling sooner than expected. 

The secretary warned that the U.S. may run out of measures to pay debts as early as June 1.

Another factor that affected early trading today were numbers from job openings and the Labor Turnover Survey, which indicated that the job market was loosening. 

While employment openings in the US hit their lowest levels since 2021. Manufactured goods orders also grew at a slow pace of 0.9 per cent, below the expectation of 1.3 per cent. 

In Europe, oil and gas prices fell 4.2 percent on the back of the Fed meeting, an investor assessment showing a fall in oil prices, and a slowdown in Chinese factory activity.  

Prices of Brent Crude were down 3.7 per cent to $76.3 a barrel, while West Texas Intermediate was also down 3.9 per cent to $72.64 a barrel.