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.
EYE-CATCHING
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.
YIELDS RISE
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.
-Reuters.