World stocks hit two-week lows on inflation jitters

World stocks hit a two-week low on Friday as rate hike guidance from the European Central Bank and jitters over upcoming US 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.

Analysts at Deutsche and Morgan Stanley lifted their euro zone rate hike forecasts on Friday. Investors expect the Federal Reserve to raise interest rates by 50 basis points next week, especially if US consumer price data on Friday confirms elevated inflation. The consensus forecast sees a year-over-year inflation rate for May of 8.3 per cent, 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.