Home ›› 23 Apr 2022 ›› Stock
World stocks fell to five-week lows and bond yields rose on Friday as investors fretted about rate hikes in the United States and the euro zone, while the yuan struck a seven-month low as lockdowns in Shanghai hit China's growth prospects.
US Federal Reserve Chairman Jerome Powell said on Thursday that a half-point interest rate increase would be "on the table" when the Fed meets in May, adding it would be appropriate to "be moving a little more quickly".
His remarks strengthened market expectations of at least another half-percentage-point rate hike next month, and Nomura now expects 75-basis-point hikes at the Fed's June and July meetings, which would be the biggest since 1994.
European Central Bank officials said on Thursday that the central bank might start hiking euro zone rates as early as July, while Bank of England interest rate-setter Catherine Mann said that borrowing costs would probably have to rise further.
Euro zone money markets now fully price in a 25 basis point rate hike by July.
"The Fed, the ECB and the Bank of England were pushing hawkish commentaries on the markets and markets have reacted," said Monica Defend, head of Amundi Institute, though she added:
"For the euro area, we are more sceptical on the fragility of the economic cycle, there is big potential for a recession to take place in Germany and Italy."
The euro zone is feeling the impact of the war in Ukraine.
The mayor of Mariupol made a new appeal on Friday for the "full evacuation" of the southern Ukrainian city which President Vladimir Putin says is now controlled by Russian forces.
Markets are also watching out for euro zone and US flash purchasing managers' data for April, with French data showing business activity grew at the fastest pace in more than four years, helped by fewer COVID-19 restrictions.
MSCI's world equities index was down 0.41 per cent at its lowest since mid-March, and was heading for a 0.7 per cent drop on the week.
S&P futures were 0.18 per cent softer after Wall Street indexes fell on Thursday, with the S&P 500 down 1.5 per cent and the Nasdaq down 2 per cent.
European stocks dropped 1.06 per cent, with France's CAC 40 down 1.39 per cent ahead of Sunday's presidential run-off vote. Britain's FTSE fell 0.52 per cent.
Selling pressure persisted in bond markets, driving five-year US Treasury yields to 3.049 per cent and two-year yields to 2.7620 per cent, both at their highest since late 2018. [US/]
German two-year yields rose to 0.211 per cent, their highest since early 2014.
In currency markets, the yuan hit a seven-month low and was on course for its worst week since 2019, as lockdowns in Shanghai take a bite out of growth.
Analysts at HSBC say a comprehensive easing package on all fronts, both monetary and fiscal, from Beijing is needed, including loosening measures in the property sector, which has been hit hard by restrictions on access to credit.
The dollar was down 0.25 per cent against the yen at 128 after talk of joint Japan-US FX intervention, though the euro fell 0.29 per cent against the dollar to $1.0805, giving up Thursday's bounce as nerves about Sunday's French presidential election creep in.
The US dollar index rose 0.26 per cent towards recent two-year highs.
