Stocks across global financial markets were pummeled after a wave of rate hikes from central banks, with the Federal Reserve and the European Central Bank warning of more pain to come.
(Bloomberg) — Stocks across global financial markets were pummeled after a wave of rate hikes from central banks, with the Federal Reserve and the European Central Bank warning of more pain to come.
US equities hit session lows in the afternoon in New York, with the S&P 500 declining as much as 2.9% and the tech-heavy Nasdaq 100 falling as much as 3.8%. Risk assets have been on the back foot since Fed Chair Jerome Powell reiterated his hawkish stance on Wednesday and policymakers signaled a peak rate that was above market expectations. Stocks in Europe closed Thursday’s session lower after the ECB’s upward revision to 2024 inflation projections.
The US dollar rallied the most in two months. Britain’s pound fell after the Bank of England slowed its pace of monetary tightening, which investors interpreted as a sign that rates could peak at a lower level than expected. The euro dropped.
A global rally sparked by softer-than-expected US consumer price index data came to an abrupt halt on Wednesday after the Fed sought to dispel hopes for a rate cut next year. While Fed and ECB slowed the tempo of their hikes to half a percentage point, Powell and ECB President Christine Lagarde hammered home their resolve to remain persistent as they battle inflation.
Investors are also digesting a bevy of US data Thursday showing the economy cooling, even as a labor market stays strong. Softening in the labor market remains a big target for the Fed.
“The pullback in the market today — we aren’t surprised by it,” Nadia Lovell, UBS Global Wealth Management senior US equity strategist, told Bloomberg Television on Thursday. “This is a market that has traded on the hope that the Fed will not do what they say they will do. Yesterday they sent a clearly different message.”
Lovell doesn’t think a recession is already priced in and said she expects repricing in the first half of 2023 to account for slower growth.
Key events this week:
- Eurozone S&P Global PMI, CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 2.6% as of 2:35 p.m. New York time
- The Nasdaq 100 fell 3.4%
- The Dow Jones Industrial Average fell 2.5%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 1%
- The euro fell 0.6% to $1.0622
- The British pound fell 2% to $1.2176
- The Japanese yen fell 1.7% to 137.78 per dollar
Cryptocurrencies
- Bitcoin fell 2.2% to $17,439.5
- Ether fell 2.8% to $1,273.88
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.44%
- Germany’s 10-year yield advanced 14 basis points to 2.08%
- Britain’s 10-year yield declined seven basis points to 3.24%
Commodities
- West Texas Intermediate crude fell 1% to $76.49 a barrel
- Gold futures fell 1.6% to $1,788.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and John McCorry.
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