World stocks fell to near 2-year lows ahead of US CPI data

  • MSCI’s ACWI world stock index is at its lowest level since November 2020
  • European stocks were down 0.7% in early trade
  • Dollar pushes 7th day of gains, yen near 1998 lows
  • US CPI data is set to bet on a Fed rate hike
  • UK gilt yields rise ahead of planned end of BOE support

LONDON, Oct 13 (Reuters) – World shares fell to a two-year low and Japan’s new exchange rate was close to 1998 levels on Thursday as investors braced for key U.S. inflation data. walk

Global markets have been battered for weeks, and there was little sign of respite in either Asia or Europe as weak stocks sent MSCI’s 47-country world index (.MIWD00000PUS) lower for a seventh day.

A seemingly unstoppable dollar held its ground in currency markets to bolster the yen’s fightback, while bond traders were also watching British gilts, along with the Bank of England, as it ended emergency stabilization measures on Friday.

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Europe’s regional STOXX 600 (.STOXX) index fell 0.6%, its seventh straight decline. It’s down about 4.3% in the past six days, with markets worried that aggressive global interest rate hikes will trigger recessions.

Data already confirmed German adjusted inflation was +10.9% y/y in September, but all eyes are on US CPI data due at 1230 GMT.

Paul O’Connor, head of multi-asset at Janus Henderson Investors, said the question for investors is whether central banks like the Fed are nearing the end of rate hikes.

“Are we there yet? I feel like we’re pretty close to pricing in peak rates, but in the growth story I think there’s probably a lot of downside to come,” he said.

It will take a year to 18 months for the rate hike to take full effect. As a result, “it is quite plausible that central banks will announce a pause by the end of the year… labor markets will cool and housing markets will fall.”

Minutes of the Fed’s latest policy meeting, released Wednesday, showed that many officials “stressed that the cost of doing too little to lower inflation probably outweighed the cost of doing too much.”

However, several policymakers stressed that it would be important to “calibrate” the pace of further interest rate hikes to reduce the risk of “significant adverse effects” on the economy.

Treasury yields were rising in Europe. The benchmark US 10-year yield rose 2 basis points to 3.923%, although most equivalent European yields were down a touch.

Widespread weakness in Asia overnight saw Japan’s Nikkei (.N225) down 0.6% and South Korea’s Kospi (.KS11) down 1.8% on news that Taiwanese chipmaker giant TSMC ( 2330.TW ) was cutting its investment budget by at least 10%. he saw that he lost. put pressure on the wider region’s technology sector. read more

Hong Kong’s Hang Seng (.HSI) lost 1.9% and mainland Chinese blue chips (.CSI300) lost 0.3%, sending MSCI’s index of Asia-Pacific shares (.MIAP00000PUS) near a 2 1/2-year low.

U.S. bond futures gave some hope, rising 0.1% after another drop in the S&P 500 (.SPX) overnight.

“I’ve been more concerned than I’ve been for a while,” said Tom Nash, fixed-income portfolio manager at UBS Asset Management in Sydney. “The risk of an episode of overexertion and some failure in financial markets is higher than I remember.”


Fed Governor Michelle Bowman said in a speech on Wednesday that she would continue to support aggressive interest rate hikes if high inflation does not begin to ease.

Markets are projecting a 90% chance of another 75 basis point rate hike in November, versus a 10% chance of a half-point hike.

The dollar index, which measures the greenback against its six major rivals, barely edged back from around 113.25 ahead of the CPI data.

The U.S. currency held close to a 24-year high against the yen and last traded hands at 146.81, while sterling fell to $1.1050, still up from Tuesday’s two-week high of $1.0925.

The benchmark 10-year gilt yield rose to 4.337% from a fresh 14-year high of 4.632% in early trade.

The Bank of England insisted that its emergency bond market support would end on Friday as originally announced, contradicting media reports that the bailout would continue if necessary.

BoE Governor Andrew Bailey rattled markets on Tuesday by saying British pension funds and other investors hit hard by the fall in bond prices had until that deadline to address their concerns.

“Obviously, the markets are looking a bit choppy and I think everyone remains concerned about the stability of the UK financial markets – which is unusual.”

“I would say it’s kind of heroic to say that the risk of a systemic problem has been eliminated, because these are big steps and we don’t know how many concessions are needed right now,” said Janus Henderson’s O’Connor. “Markets still feel very dysfunctional”

Meanwhile, crude oil markets remained subdued after falling 2% on Wednesday amid concerns about demand.

Brent crude futures were down 7 cents, or 0.1%, at $92.38, while U.S. West Texas Intermediate crude was down 21 cents, or 0.2%, at $87.06 a barrel.

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Additional reporting by Kevin Buckland in Tokyo Editing by William Maclean

Our standards: Thomson Reuters Trust Principles.

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