Investors dump stocks on growth fears as Switzerland and UK hike rates

Investors dump stocks on growth fears as Switzerland and UK hike rates

NEW YORK, June 16 (Reuters) – Global stocks tumbled again on Thursday and government bonds hovered around multi-year highs after a series of rate hikes by global central banks reignited fears that aggressive tightening of policies could drag economies into recession.

After a relief rally on Wednesday, as investors welcomed the US Federal Reserve’s aggressive move to raise rates by 75 basis points, its biggest rate hike since 1994, by buying shares Two more waves of more restrictive policies in Britain and Switzerland appeared to have reassured investors. focusing on the possibility of economies slowing down as rates rise.

“Can the economy take it? So far, the main indicators show good readings, but we remain cautious in the face of a consumer strike,” said Giuseppe Sette, president of quantitative research firm Toggle.

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MSCI Stock Indicator Worldwide (.MIWD00000PUS) it fell 2.25% to hold near a 19-1/2-month low.

In New York, the Dow Jones Industrial Average (.DJI) fell 2.5%, the S&P 500 (.SPX) shed 3.3% and the Nasdaq Composite (.IXIC) fell 4.1%. All three indices were trading at their lowest level in at least a year and a half.

The dollar, which has benefited from rising US yields, faltered on Thursday, weighed down in part by the Swiss franc, which rose after the Swiss National Bank surprised investors earlier in the day by rising interest rates for the first time in 15 years at 50%. points. read more

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

In early afternoon New York, the Swiss franc was up a whopping 2.9% in its biggest one-day gain in seven years. A rising Swiss franc dragged the dollar index down 0.95% to 103.80, pulling it away from a 20-year high of 105.79 hit on Wednesday.

“There is a lot of nervousness. After the initial easing from the Fed … the markets seem to have realized that it is still a 75 basis point rate hike,” said Giuseppe Sersale, strategist and portfolio manager at Anthilia in Milan. .

“If even the Swiss central bank rises surprisingly half a point, clearly investors imagine that central bank tightening remains very violent. There is very little to cheer about,” Sersale added.

Underscoring pessimism in markets, MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.84%, and the pan-European STOXX 600 index (.STOXX) fell 2.47%. swiss stocks (.SSMI) they came close to confirming a bear market pattern, having fallen about 19% from the closing high on Jan. 3.

Britain’s Best FTSE 100 (.FTSE) The benchmark equity index tumbled 3.14% following the BoE rate hike, derailing some forecasts of a larger move.

“Once again, the BoE looks like the timid cat alongside the Fed’s roar against inflation… A 6-3 vote on 25 bps means sterling bulls will have little to back any attempt to push the pound bullish against the dollar,” said Chris Beauchamp, chief market analyst at IG Group in London.

Sterling slumped initially after the BoE rate announcement, but recovered in New York trade to rise 1.4% to $1.23485.

STRIKING

The Fed’s rate hike on Wednesday was accompanied by projections showing US economic growth would slow to a below-trend rate of 1.7%, with policymakers expected to cut interest rates. in 2024.

Data on Friday showed a sharper-than-expected rise in US inflation in May, along with a University of Michigan survey that showed consumers’ five-year inflation expectations rose sharply to their highest level since June. from 2008.

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

10-year US Treasury yields peaked at 3.495% before falling back to 3.3125%. , but still in sight of an 11-year high of 3.498% hit on Tuesday.

Oil prices reversed earlier losses after the United States announced new sanctions against Iran, and as supply concerns remain at the forefront of energy markets.

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

Gold, which has been hit by a stronger dollar and rising yields, rose as the dollar and Treasury yields faltered. Spot gold jumped 1.2% to $1,854.54 an ounce.

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Reporting by Danilo Masoni and Andrew Galbraith; Edited by Marguerita Choy, Catherine Evans, and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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