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European markets were lower Tuesday as investors assessed the interest rate outlook for 2023. The Stoxx 600 was down 0.4% in early morning trade, with most sectors and major stocks trading in negative territory. Autos led losses, down 1.2%, while bank stocks and oil and gas bucked the trend by gaining 0.1%. Last week, the European Central Bank hiked its key interest rate from 1.5% to 2% and said it would look to shrink its balance. sheet by around 15 billion euros ($15.9 billion) every month from March 2023 to the end of the second quarter. The ECB said rate hikes would need to continue “significantly at a steady pace.” The Bank of England and the Swiss National Bank struck similar tones and also opted for 50-point hikes, matching the US Federal Reserve’s decision last Wednesday. Fed Chairman Jerome Powell also indicated that the central bank’s efforts to rein in inflation are far from over, and said policymakers will “have to stay at it.” Asia-Pacific markets traded lower, with greater Chinese markets leading losses in the region despite government’s pledges to stabilize the economy in 2023. US stock futures fell Tuesday morning, reversing directions after the Bank of Japan announced it will widen its yield target range.

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