Stocks hit 2-year low as central banks intensify war on inflation

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  • MSCI All-World at 2-year low
  • Yen stable but traders wary of further interference
  • Treasury Head for 8th Weekly Loss

LONDON/SYDNEY, Sep 23 (Reuters) – Stocks hit a two-year low on Friday and bonds suffered an eighth weekly loss as investors digested the prospect of a far more aggressive rise in US interest rates, while The currency market remained volatile after the intervention of Japan. To boost the yen.

Interest rates rose sharply this week in the United States, Britain, Sweden, Switzerland and Norway – among other places – but it was a signal to the Federal Reserve that it expects to maintain high US rates through 2023. Which closes the latest sell-off.

MSCI’s World Stock Index (.MIWD00000PUS) On Friday it fell to its lowest level since the middle of 2020, a fall of nearly 12% in the month or so since Fed Chair Jerome Powell clarified that easing inflation would hurt.

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Data on the decline in the German economy in September showed the euro fell for the fourth day in a row, as consumers and businesses faced an unprecedented energy crisis and spiraling inflation. read more

European stocks were a sea of ​​red for the second day, under pressure from losses in everything from bank stocks to natural resources and technology stocks.

Pan-Regional STOXX 600 (.STOXX) was down about 0.5% in early trade, while Frankfurt’s DAX (.GDAXI) With a decline of 0.6%, it was ranked as one of Europe’s worst-performing indices. FTSE of London (FTSE) The pound fell 0.1% on the background of falling to a 37-year low.

“A lot other than inflation data and central bank policy decisions are just noise at the moment, the market is firmly, and almost entirely, focused on how higher rates will move in developed markets, and they How long will those peaks last,” said Michael Brown, chief strategist at CaxtonFX.

“The Fed’s message on Wednesday was clear, that rates are going higher than the market, and policy will remain restrictive for a long time to come, possibly through 2023 – in that environment, it is nearly impossible to have long stocks, or want to buy Treasuries. So the selloff in both is not a surprise, and should continue.”

S&P Emini futures fell 0.3%, signaling a weak start on Wall Street later.

With US rates rising sharply and prolonged highs, the dollar hit its highest level in two decades this week, while yields on the benchmark 10-year US Treasury rose as investors turned to inflation-sensitive assets like bonds. left it.

The 10-year yield was trading down 2 basis points at 3.68% that day, but has risen nearly a quarter percentage point this week alone and is poised for an eighth consecutive weekly increase.

“The 10-year was holding up to the new calibrated cash rate,” Westpac’s head of rates strategy Damian McCullough said in Sydney.

“If you think the front-end is going to peak at 4.60%, can you really sustain the 10-year bond yield at 3.70%?” They said.

“It’s very attractive price action… I think this volatility is going to spread across all markets in the near term (until) the rate market stabilizes.”

The euro and yen fell to 20-year lows on Thursday, until Japanese officials stepped into the market to buy the yen for the first time since 1998 and halt its prolonged decline. read more

The yen was last steady at $142.29 per dollar and was on course for its best week in more than a month, but some believe it will continue to strengthen.

Meanwhile, two-year gilt yields headed for their worst week in 13 years after the Bank of England gave an interest rate hike that was lower than some currency traders expected.

Later on Friday, new Finance Minister Kwasi Quarteng will announce a financial plan that is perhaps even worse news for inflation and gilts. Read more

Non-interest paying gold has come under pressure, especially during the quarter, as yields have increased. It was down 0.1% on the day at $1,667 an ounce, its weakest in two years.

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Editing by Sam Holmes and Kim Coghilla

Our Standards: Thomson Reuters Trust Principals.

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