World stocks went up a little bit on Monday, but they stayed close to their lows from the last six weeks. Investors started the last full trading week of the year still worried about the effects of an interest rate hike on the economy in 2023.
Last week, both the U.S. Federal Reserve and the European Central Bank raised interest rates and said they would do so again. There is even talk that the Bank of Japan, which meets on Monday and Tuesday, might change its ultra-dovish stance.
The MSCI world stock index benchmark was close to parity.By 9:02 GMT, the index had gone up 0.1%. On Friday, after a week with a lot of interest rate hikes, it had dropped to its lowest point since November 10.
Related:Â Stocks and oil prices keep falling as fears of a recession grow.
Europe’s Stoxx 600 tried to recover, going up 0.5% in early trading. Short-term yields in the euro zone were close to their highest levels in more than a decade, as investors were still worried about a “hawkish” ECB.
“Going into the end of the year, the markets could have done without (ECB President Christine) Lagarde’s extreme hawkishness. “It even messed up the rate markets,” said Carlo Franchini, who works at Banca Ifigest in Milan as the head of institutional clients.
“No one really trusts any of the other central banks, except for the Bank of Japan and maybe the Bank of England.” “It’s not possible to keep raising interest rates at this rate next year,” he added.
Luis de Guindos, vice president of the ECB, said on Monday that the ECB will raise rates even more. He also said that the ECB was committed to bringing inflation down to its 2% goal by the middle of the decade.
While this is going on, the energy ministers of the European Union are meeting in Brussels to try to agree on a cap on gas prices, which have pushed up energy bills and caused this year’s inflation to hit a record high.
The Nikkei dropped 1.05 percent to a six-week low, and the yen went up 0.5% to 135.9 yen per dollar. MSCI’s biggest index of Asia-Pacific stocks other than Japan fell by 0.15 percent.
Sources say that Japan’s government and central bank may change the 2% inflation goal they set together next year. This could make it more likely that the BOJ will change its ultra-loose monetary policy.
Rodrigo Catril, a strategist at the National Australia Bank (OTC:NABZY) in Sydney, said, “Where there’s smoke, there’s bound to be fire.”
“This kind of news supports the idea that the government will give the BOJ a chance to be more flexible,” he said, “and that some of the yen’s super-undervaluation can be fixed.”
This year, the yen has lost 15% of its value against the dollar, making it the worst-performing G10 currency. This is mostly due to the difference between rising U.S. rates and stable Japanese rates.
Yields on Japanese government bonds with a term of five years hit their highest level in almost eight years. [JP/]
In China, stocks had their biggest one-day drop in seven weeks because people were worried that the rising number of COVID-19 cases would hurt the economy more than the government’s plans to help.
“Interest rates are not the only thing that could change the level of activity around the world,” Jane Foley, a strategist at Rabobank, wrote.
Even though the Fed thinks there will be more rate hikes in the future, U.S. rates stayed the same last week. Traders are worried that rates are already high enough to start hurting economic growth. Yields on 10-year Treasurys were at 3.5277%.
Last week, the S&P 500 fell by 2%. It’s down 20% for the year and has failed several times to trade above its 200-day moving average in a way that can last.
Related: Asian stocks drop because people are worried about a recession, and weak data hurt the Nikkei.
S&P 500 futures rose 0.4%.
The euro went up 0.6% to $1.064, which is less than last week’s six-month high of $1.0737. The pound went up 0.7% to $1.23, which is also less than last week’s peak. The dollar dropped by 0.6%. [FRX/]
On Monday, Brent crude futures went up 0.4% to $79.36 a barrel on hopes that demand would go up. However, it hasn’t gone up much at all this year. [O/R]
Gold held steady at $1,769 an ounce, up 0.3%. Bitcoin kept trading for less than $17,000. [GOL/]
