January 21, 2022
  • January 21, 2022

Stocks fall as hawkish central bank tilt upsets markets

By on December 17, 2021 0

A man wearing a protective mask, amid the COVID-19 outbreak, is reflected on an electronic board displaying stock prices outside a brokerage house in Tokyo, Japan, September 21, 2021. REUTERS / Kim Kyung-Hoon

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  • Stocks slide in all regions, oil prices fall
  • The BoJ takes a small step towards a less accommodating policy

LONDON, Dec. 17 (Reuters) – Shares fell on Friday as traders grapple with this week’s surprisingly belligerent turn by major central banks in the fight against inflation, and as rising Omicron cases spark concerns about the impact on the global economy.

European stocks fell, Asian stocks closed near year-round lows and Wall Street looked poised to open weaker after a deadly session the day before, driven by steep drops in tech stocks.

The pan-European EUROSTOXX (.STOXX) was down 0.65% at 11:30 GMT. The German DAX (.GDAXI) fell 0.81%, although the UK FTSE 100 (.FTSE) reversed the trend with a rise of 0.26%.

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Wall Street futures were in the red, Nasdaq futures were down 0.66%.

U.S. stocks have now canceled all of their gains on Wednesday when markets hailed the Federal Reserve’s pledge to tackle rising inflation with faster bond cuts and year-round interest rate hikes. next.

The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.76% on Friday, standing just above the year-long low set last week, while the blue Chinese crisps (.CSI300) lost 1.59% and suffered their worst week in three months.

Stocks are entering the year-end period – when many traders are reluctant to take new positions – near record highs, but with many reasons for concern.

The hawkish tilt of central banks this week, including the Federal Reserve and the Bank of England, and to a lesser extent the European Central Bank, was initially greeted by a wave of buying from investors convinced policymakers curb the rise in inflation.

But the mood has since turned darker as traders worry markets swollen with cheap money are vulnerable to even the smallest of stimulus setbacks.

“Volatility is on the rise again, reducing the predictability of what could happen next,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

After experiencing its best week since February last week, the MSCI World Index is down 1% from Monday’s opening (.MIWD00000PUS).

MSCI World Index

Even the Bank of Japan on Friday canceled some emergency pandemic financing, but maintained its ultra-flexible policy and extended financial relief for small businesses, raising expectations that it will remain among the most accommodating central banks. for the foreseeable future. Read more

Eurozone inflation hit an all-time high in November at 4.9% year-on-year, official data confirmed on Friday, while several conservative ECB policymakers said the central bank may be underestimating prices. inflation risks.[Lirelasuite[readmore[Lirelasuite[readmore

OMICRON SEEDS

Added to caution are concerns that rising Omicron infection rates mean a tough few months for the global economy, although most economists believe the damage will be much less than in previous waves of case of COVID-19.

Investors have kept the safe-haven public debt. The benchmark 10-year US Treasury yield fell to 1.409%, while the two-year yield remained stable at 0.63%, after hitting recent highs. German yields also fell.

“Ordinarily, following a more hawkish result (Federal Open Market Committee), yields are expected to rise in anticipation of the Fed’s tightening cycle,” Westpac analysts said.

“However, there are currently competing dynamics, with lingering fears of inflation triggering harsher Fed rhetoric being offset by fears that economic growth will be interrupted by Omicron in the near term,” they added.

The Fed wasn’t the only central bank to turn hawkish with the Bank of England surprising the markets on Thursday by becoming the first G7 central bank to raise interest rates since the pandemic. Read more

The pound slipped 0.2%, but at $ 1.329 it held on to part of Thursday’s jump after the BoE rose.

The dollar index traded at 96, unchanged on the day and down nearly 1% from Wednesday’s high immediately after the Fed’s announcement.

The Japanese yen edged up to 113.48 yen to the dollar.

Oil prices fell, with Brent crude falling 1.65% to $ 73.78 per barrel and US crude losing 1.73% to $ 71.16 per barrel.

Spot gold rallied, breaking above the token level of $ 1,800 to trade 0.6% higher at $ 1,809 an ounce, its highest level since November 26.

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Additional reporting by Alun John in Hong Kong; edited by David Evans, Kirsten Donovan

Our Standards: Thomson Reuters Trust Principles.