(Reuters) – SingaporeWorld equities headed for their worst week since the markets’ pandemic meltdown in March 2020, as interest rate hikes in the United States and Britain, and a surprise one in Switzerland, placed investors on edge about future economic development.
The Bank of Japan was the only outlier in a week where money prices soared around the world, keeping with its strategy of holding 10-year rates near zero on Friday.
In volatile trading, the yen fell more than 1% to 133.88 per dollar.U.S. futures attempted a recovery and Chinese equities climbed, but that was set against a week of losses and anxiety that rate hikes are going to strangle growth for years.
MSCI’s broadest index of Asia-Pacific equities outside Japan plummeted to a five-week low, driven by selling in Australia, where the ASX 200 sank 1.8 percent . Japan’s Nikkei plummeted 1.7 percent and is headed for a weekly slump of roughly 7 percent .
S&P 500 futures rose 0.8 percent, while Nasdaq 100 futures rose 1%, but both are still down for the week.[.N]
EuroSTOXX 50 futures rose 1%, while FTSE futures rose 0.5 percent.
“We are entering a tough phase of the regime shift, as the risks over economic growth add to the already hot inflationary backdrop,” said Vincent Mortier, chief investment officer at Europe’s biggest fund manager, Amundi.
“The current repricing is taking most of the overvaluation out of the market, but current levels are vulnerable to any deterioration in corporate fundamentals.”
So far this week, global stocks are down 5.7 percent, on track for the steepest weekly percentage drop in more than two years.
ONE WAY
Bonds and currencies were jittery after a rollercoaster week. In recent sessions, the dollar has pulled back from a 20-year high, but it hasn’t fallen far and looks set to end the week steady.
The Swiss franc’s leap made for an additional drag this week since it is used as a funding currency and often changed for dollars before those are swapped for high yielders—meaning dollars get sold when that trade reverses.
The dollar was firm on Friday, rising 0.3 percent to $1.0518 on the euro and 0.5 percent to $0.7012 per Australian dollar, in addition to surging against the yen.[FRX/]
“The path of least resistance is lower stocks and a higher dollar,” said Spectra Markets’ Brent Donnelly. “The Fed doesn’t know where inflation is going, and neither do we.”
Like the Fed and the Swiss central bank, the Bank of England announced a 25 basis point rate rise this week. It was smaller than expected but prompted gilts to sell and sterling to rise on bets that future hikes would come thick and fast.
“If a central bank does not move aggressively, yields and risk prices will move more in the direction of rate hikes down the road,” said NatWest Markets’ strategist John Briggs.
“Markets may just be continuously adjusting to an outlook for higher global policy rates … as global central bank policy momentum is all one way.”
Sterling gained 1.4 percent on Thursday and continued to rise on Friday, pointing to a steady week.On Thursday, two-year gilts rose 18 basis points to 2.143 percent.[GB/]
The U.S. labour and housing data came in soft on Thursday, on the heels of disappointing retail sales figures, with the worries knocking the dollar and helping Treasuries.
Benchmark 10-year Treasury yields fell nearly 10 bps overnight but wobbled higher to 3.2313 percent during Asia’s morning. Yields rise when prices fall. [US/]
Growth fears took oil on a brief trip lower before prices steadied. Brent crude futures were last at $119.70 a barrel. Gold held at $1,844 an ounce and bitcoin was kept under pressure at $20,700.
