Investors dump stocks on growth fears as Switzerland and UK raise interest rates

NEW YORK (Reuters) – Global stocks fell again on Thursday and government bonds hovered near multi-year highs after a series of interest rate hikes by global central banks renewed fears that strict policy tightening could drag economies into recession.

After a comfortable recovery on Wednesday when investors welcomed the US Federal Reserve’s aggressive move to raise interest rates by 75 basis points – the largest rate increase since 1994 – by buying shares, two more waves of policy tightening in Britain and Switzerland appeared to have woken investors up. To focus on the chance that economies will slow as interest rates rise.

“Can the economy handle this? So far, the leading indicators are showing good readings, but we remain wary of a consumer strike,” said Giuseppe Seit, president of quantitative research firm Toggle.

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MSCI’s gauge of stocks worldwide (.MIWD00000PUS) is down 2.25% to hover near a 19-1/2 low.

In New York, the Dow Jones Industrial Average (.DJI) fell 2.5%, the S&P 500 (.SPX) fell 3.3% and the Nasdaq Composite (.IXIC) fell 4.1%. All three indices have been trading at their lowest levels in at least 1-1/2 years.

The dollar, which benefited from higher US yields, set a mark on Thursday, weighed in part by the Swiss franc, which rallied after the Swiss National Bank surprised investors earlier in the day by raising interest rates for the first time in 15 years by 50 basis points. points. Read more

The Bank of England (BoE) also raised interest rates on Thursday for the fifth time since December by 25 basis points, a day after the European Central Bank promised support to quell a bond market rout fueled by upbeat expectations. Read more

Early in the evening in New York, the Swiss franc rose 2.9% in its biggest one-day gain in seven years. The Swiss franc’s rally pushed the dollar index down 0.95% to 103.80, pushing it off a 20-year high of 105.79 hit on Wednesday.

“There’s a lot of tension. After the Fed’s initial relief… markets seem to have woken up that they are still raising rates by 75 basis points,” said Giuseppe Cercil, strategist and portfolio manager at Anthelia in Milan.

“Even if the SNB suddenly raises half a point, investors are clearly imagining that central bank tightening is still very violent. There is not much to cheer about,” Cerciel added.

Confirming the gloom in the markets, the broadest MSCI Asia Pacific Stock Index outside Japan (.MIAPJ0000PUS) fell 0.84%, and the STOXX All-European 600 Index (.STOXX) was down 2.47%. Swiss stocks (.SSMI) are close to confirming a bear market pattern, having fallen about 19% since Jan. 1. 3 closing heights.

Britain’s main FTSE 100 (.FTSE) stock index fell 3.14% after the Bank of England raised its interest rate, confounding some expectations of a bigger occurrence.

“Once again, the BoE looks like a shy cat next to the Fed’s roar against inflation. … The 6-3 vote on 25 basis points means the sterling bulls will have little to support any attempt to push the pound higher against the dollar,” said Chris Beauchamp. , Senior Market Analyst at IG Group in London.

The British pound fell initially after the Bank of England interest rate announcement, but recovered in New York trading, rising 1.4% at $1.23485.

Stupendous

Wednesday’s rate hike was accompanied by expectations showing US economic growth slowing to a below-trend rate of 1.7%, and policy makers anticipating a rate cut in 2024.

Friday’s data showed a more-than-expected rise in US inflation in May, along with a University of Michigan survey showing that five-year inflation expectations for consumers jumped sharply to their highest since June 2008.

The SNB hike helped put fresh pressure on European bond prices as investors ramped up their push for ECB rate hikes. Germany’s 10-year yield, the benchmark for mass, jumped as much as 26 basis points at one point.

The 10-year US Treasury yield was 3.495% before easing back to 3.3125%. , but still within sight of the 11-year high of 3.498% reached on Tuesday.

Oil prices reversed earlier losses after the United States announced new sanctions on Iran, and with supply concerns remaining at the forefront of energy markets.

US crude jumped 1.45 percent to $116.98 a barrel, and Brent crude rose 0.57 percent to $119.19.

Gold, which has been hit by a strong dollar and higher yields, rallied as dollar and treasury yields fluctuated. And the spot gold price jumped 1.2 percent to $ 1854.54 an ounce.

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(Reporting by Danilo Masoni and Andrew Galbraith); Editing by Margarita Choi, Catherine Evans and Diane Kraft

Our Standards: Thomson Reuters Trust Principles.

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