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GLOBAL MARKETS-World stocks hit two-week lows on inflation jitters, policymakers boost yen

GLOBAL MARKETS-World stocks hit two-week lows on inflation jitters, policymakers boost yen

reuters.com · 06/10/2022 04:23
GLOBAL MARKETS-World stocks hit two-week lows on inflation jitters, policymakers boost yen

World stocks eye 2% loss for week

Dollar drops 0.64% vs yen

S&P futures up 0.19%, European stocks down 1.1%

By Carolyn Cohn and Stella Qiu

- World stocks hit a two-week low on Friday as rate hike guidance from the European Central Bank and jitters over upcoming U.S. inflation data stoked concerns about global growth, while verbal intervention from Japan boosted the yen

The ECB said on Thursday it would deliver its first interest rate rise since 2011 next month, followed by a potentially larger move in September. nL1N2XW0AB

Analysts at Deutsche and Morgan Stanley lifted their euro zone rate hike forecasts on Friday. nL8N2XX0NS nL8N2XX1CA

Investors expect the Federal Reserve to raise interest rates by 50 basis points next week, especially if U.S. consumer price data on Friday confirms elevated inflation.

The consensus forecast sees a year-over-year inflation rate for May of 8.3%, unchanged from April.

"A lot of focus is on this current number, it's not going to be a big move," said Matthias Scheiber, global head of portfolio management for multi-asset solutions at Allspring.

"I don't think it will derail what central banks currently have on their minds."

However, rate rises may hit growth, Scheiber said, adding that he had turned slightly underweight on equities in recent weeks as a result of this concern.

MSCI's world equity index .MIWD00000PUS fell 0.22% to its lowest since May 26, and was heading for a 2% fall for the week.

U.S. stock index futures ESc1 ticked up 0.19% after the S&P 500 .SPX and Nasdaq .IXIC fell more than 2% on Thursday in their biggest daily percentage declines since mid-May.

European stocks .STOXX fell 1.1% to three-week lows.

It was the 17th week in a row of outflows for European equities in the week to Wednesday, according to BofA, with $2.1 billion leaving the space, as the sector has been hit hard by the Russia-Ukraine war. nL8N2XX0YT

Britain's FTSE 100 .FTSE fell 0.75% to 2-1/2 week lows.

The Bank of England said on Friday it was satisfied that Britain's top banks could be shut down without putting at risk the stability of the financial system or disrupting customers, but it found shortcomings at Lloyds LLOY.L, Standard Chartered STAN.L and HSBC HSBA.L. nL8N2XX101

Pressure is rising on other central banks to tighten, with the BoE and Sweden's Riksbank expected to hike rates again next week.

"There’s currently a sense that inflation may be peaking, but that only applies to goods, and a better image is of rolling inflationary waves, as supply/demand pinch points shift," said Kit Juckes, head of currency strategy at Societe Generale.

The dollar fell 0.64% to 133.48 yen JPY= after Japan's government and the central bank said in a statement they were "concerned" about recent sharp yen declines and stood ready to respond as needed on currency policy. nT9N2XH02A

The yen has been ploughing 20-year lows against the dollar and seven-year troughs against the euro EURJPY= on expectations the Bank of Japan (BOJ) will continue to lag behind other major central banks in exiting stimulus policy.

The dollar =USD eased 0.18% against a basket of major currencies, pulling away from its highest level in three weeks set in the previous session. The euro EUR= was steady at $1.0622.

The two-year U.S. Treasury yield US2YT=RR, which rises with traders' expectations of higher Fed fund rates, continued its climb to hover around the highest level since early May. It touched 2.8352% compared with a U.S. close of 2.817%.

The yield on benchmark 10-year Treasury notes US10YT=RR dipped to 3.0401% compared with its U.S. close of 3.042%.

Ten-year German government bond yields DE10YT=RR inched lower to 1.425%, after hitting their highest since 2014 on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.9%, weighed down by a 1.2% drop in resources-heavy Australia .AXJO and a 1.1% retreat in South Korea .KS11. Japan's Nikkei .N225 fell 1.5%.

However, continued strong buying by foreign investors and cautious hopes of regulatory easing on tech firms lifted China stocks, despite news that the cities of Beijing and Shanghai were back on COVID-19 alert.

China's blue-chip CSI300 index .CSI300 was up 1.5%, while Hong Kong shares .HSI trimmed earlier losses to be off 0.2%.

Oil prices slipped but remained within touching distance of three-month highs as fears over new COVID-19 lockdown measures in Shanghai outweighed solid demand for fuels in the United States, the world's top consumer. O/R

U.S. crude CLc1 dipped 0.52% to $120.88 a barrel. Brent crude LCOc1 fell 0.5% to $122.45 per barrel.

Spot gold XAU= eased 0.12% to $1845.73 per ounce. GOL/



World FX rates YTDhttp://tmsnrt.rs/2egbfVh

Global asset performancehttp://tmsnrt.rs/2yaDPgn

Asian stock marketshttps://tmsnrt.rs/2zpUAr4

(Additional reporting by Alun John in Hong Kong; Editing by Bradley Perrett, Kim Coghill, Elaine Hardcastle)

((carolyn.cohn@thomsonreuters.com))

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