Risk-off sentiment returned to markets on Thursday as concern about inflation and the global economy overshadowed the Bank of England’s move to restore calm.
(Bloomberg) — Risk-off sentiment returned to markets on Thursday as concern about inflation and the global economy overshadowed the Bank of England’s move to restore calm.
US equity futures declined as initial jobless claims fell, while the S&P 500 Index headed for its third straight quarter of losses for the first time since the global financial crisis.
Technology shares slid in premarket trading, after Hong Kong’s Hang Seng Tech Index touched its lowest since inception and European stock valuations dropped to their lowest since 2012.
The dollar climbed and Treasuries slumped as investors focused on expectations the Federal Reserve will continue to deliver aggressive interest-rate hikes.
The pound snapped a two-day gain and UK gilt yields rose as Prime Minister Liz Truss’s defense of unfunded tax cuts that sent markets into turmoil failed to persuade investors.
European bond yields also rose as investors digested the latest inflation data and commentary from European Central Bank officials.
Euro-area economic confidence dropped to the lowest since 2020 as Germany prepares to borrow as much as €200 billion ($194 billion) to finance a plan to limit the impact of soaring energy costs.
“Other than the dollar, there are not many assets that are trading constructively,” said Julia Raiskin, Asia-Pacific head of markets for Citigroup Inc.
“The markets are very pessimistic. Investors are fairly on the sidelines.”
Investors are contending with threats posed by discordant moves from central banks over the past few days, with Fed officials adamant on further monetary tightening, the BOE unveiling a £65 billion ($71 billion) plan to support government debt and authorities in Asia trying to prop up weakening currencies.
“The central bank is in a very difficult position right now,” Julie Biel, Kayne Anderson Rudnick portfolio manager and senior research analyst, said of the BOE in an interview with Bloomberg TV.
“Everyone has been a little bit backed into a corner in seeing the volatility and market reaction.”
Former Bank of England Governor Mark Carney accused the UK government of “undercutting” the nation’s economic institutions, and said that its fiscal plans were to blame for the drop in the pound and bonds.
Simon Wolfson, the boss of Next Plc and a Conservative peer, also appeared to blame the Tory government for a crash in the currency and a worsening outlook for UK inflation, which the company cited as it lowered guidance for sales and profits.
Next’s shares fell as much as 9.8% in London and an index of retailers plunged to the lowest in a decade.
In other notable moves, Porsche AG rose after the largest initial public offering in Europe in more than a decade.
European miners rose and aluminum jumped by a record on the London Metal Exchange after Bloomberg reported the bourse plans to discuss a potential ban on new Russian metal supplies.
Separately, the European Commission announced an eighth package of sanctions that would include a price cap on Russia’s oil exports as Russia vowed to go ahead with the annexation of the parts of Ukraine that its troops currently control after UN-condemned votes, putting the Kremlin on a fresh collision course with the US and its allies.
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Key events this week:
- US initial jobless claims, GDP, Thursday
- Fed’s Loretta Mester, Mary Daly speak at events, Thursday
- China PMI, Friday
- Euro zone CPI, unemployment, Friday
- US consumer income , University of Michigan consumer sentiment, Friday
- Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 1.4% as of 8:35 a.m.
New York time
- Futures on the Nasdaq 100 fell 1.8%
- Futures on the Dow Jones Industrial Average fell 1.2%
- The Stoxx Europe 600 fell 1.7%
- The MSCI World index rose 1.1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.4% to $0.9697
- The British pound fell 0.3% to $1.0853
- The Japanese yen fell 0.4% to 144.77 per dollar
Cryptocurrencies
- Bitcoin fell 1.9% to $19,193.24
- Ether fell 2.2% to $1,320.37
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 3.81%
- Germany’s 10-year yield advanced 15 basis points to 2.27%
- Britain’s 10-year yield advanced 19 basis points to 4.20%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures fell 0.6% to $1,660.10 an ounce
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