World stocks fell and bonds resumed their slide after a surprise Swiss interest rate hike fuelled concerns about surging inflation. And an aggressive policy tightening outlook from global central banks.
The MSCI’s benchmark for global stocks (.MIWD00000PUS) fell 0.4% by 1158 GMT. The initial positive reaction to the widely expected 75 basis point (bps) rate hike by the U.S. Federal Reserve also fizzled out.
The pan-European STOXX 600 (.STOXX) fell to its lowest since February 2021, down 2.4%, S&P 500 and Nasdaq e-mini futures slid 2.2% and 2.6% respectively. Pointing to a reversal of the previous session’s rally.
While Swiss stocks (.SSMI) were close to confirming a bear market pattern, the UK’s top FTSE 100 (.FTSE) equity benchmark briefly came off lows as sterling plunged following the BoE’s rate hike, which confounded some forecasts of a bigger move.
The Fed approved its biggest interest rate hike since 1994. And officials predicted further steady rises this year, targeting a federal funds rate of 3.4% by year-end.
Fed projections also showed U.S. economic growth slowing to a below-trend rate of 1.7%, and policymakers expect to cut interest rates in 2024. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.1%, erasing earlier gains.
After retreating from a 20-year peak following the Fed meeting, the dollar regained some footing.
The global dollar index , which tracks the greenback against a basket of six peers, was last up 0.25% at 105.06. The Swiss franc soared after the surprise rate hike and was set for its best day against the euro in seven years. It was last up 1.8% against the euro at 1.019 and was 1.4% higher against the dollar at 0.9805. Sterling fell 0.2% to $1.2141. It fell as much as 1.1% in the immediate aftermath of BoE’s decision before recovering.
The SNB hike helped put fresh pressure on European bond prices as investors ramped up bets for ECB rate hikes. Germany’s 10-year yield, the benchmark for the bloc, rose 26 basis points and was set for its biggest jump since 1998. U.S. 10-year Treasury yields rose 18 bps to 3.475%.
Oil prices erased early gains on the back of inflation concerns highlighted by interest rate hikes in the United States, Britain and Switzerland.
Brent crude was last down 1.9% to $116.2 per barrel and U.S. crude fell 1.9% to $113.1.
Gold was lower as the dollar firmed. Spot gold last traded at $1,830.7 per ounce, down 0.8% on the day.