- Stock indices down 1% to 3%, US futures weak
- Cenbank chiefs reiterate inflation warning this week
- Sweden’s Riksbank latest to raise rates
- All eyes are on U.S. core price data due later
- Chart: Overall Asset Performance
LONDON, June 30 (Reuters) – Shares fell on Thursday to extend what is the worst first half of the year for global stock prices on record, as investors fear the latest show of central bank resolve controlling inflation does not quickly slow down economies.
Central bank chiefs from the US Federal Reserve, European Central Bank and Bank of England met in Portugal this week and expressed their renewed commitment to controlling inflation, however painful it may be. cause.
While there wasn’t much new in the post, it was another warning that the era of cheap money that had turbocharged stock prices for years is coming to an end.
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Traders are now focused on US core price data due at 12:30 GMT which should underline the scale of the inflation challenge. Read more
The MSCI World Equity Index was last down 0.67% (.MIWD00000PUS), with year-to-date losses of more than 20%, the worst fall since the index’s inception. The falls erased $13 trillion from the value of stocks.
On Thursday, the Euro STOXX extended its pre-European mid-session dips to drop 2.15% (.STOXX), while Germany’s DAX (.GDAXI) weakened 2.45%. Britain’s FTSE 100 was down 1.98% (.FTSE).
US futures have fallen sharply, with little sign so far that the new quarter will attract brave bargain hunters. The dramatic decline in asset prices this year has been led by tech-heavy indices and stocks more sensitive to rising interest rates.
The S&P 500 fell 20%, its worst first half since 1970 and its worst two-quarter performance since the 2008 financial crisis.
“Fed Chairman (Jerome) Powell and the FOMC (Federal Open Market Committee) don’t want to be wrong. They want to be 90% sure that inflation is down, not balanced,” said Steve Englander, Head of of G10 FX Global Research at Standard Chartered.
“So the signals they are sending are becoming increasingly hawkish as they see the market as perhaps prematurely pricing victory over inflation.”
Sweden’s Riksbank became the latest to raise borrowing costs, pushing its benchmark rate to 0.75% from 0.25% as expected and signaling another sharp tightening in an attempt to control price growth. Read more
The Hungarian central bank also raised rates by 0.5% to 7.75%. Read more
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1.25%.
The Japanese Nikkei (.N225) fell 1.54%, although its decline this quarter was a relatively modest 5% thanks to a weak yen and the Bank of Japan’s stubborn commitment to ultra-easy policies .
Chinese blue chips (.CSI300) gained 1.44%, helped by a survey showing a sharp recovery in services activity. Read more
With investors so fearful of a global economic slowdown marked by central bank policy tightening, some analysts are poised to call for a rebound in the second half.
“It’s not that we think the world and economies are in great shape, just that an average investor expects economic catastrophe, and if that doesn’t materialize, risky asset classes could recoup most of their first-half losses,” JPMorgan wrote in a research note.
THE DOLLAR REIGNS SUPREME
Recession risk was enough to push US 10-year rates down to 3.06% from their recent high of 3.498%, though they are still up 73 basis points for the quarter and nearly 160 basis points for the year.
The ferocity of the Fed and investors’ desire for liquidity in difficult times gave the US dollar its best quarter since the end of 2016. The dollar index rose 0.3% on Thursday to 105.34, putting it a hair’s breadth from its recent two-decade high of 105.79.
The Swedish krona fell on the back of the Riksbank rate hike – the euro last rose 0.3% to 10.719 kroner.
The pound reacted little to data showing that the UK’s balance of payments deficit hit a record 8.3% of GDP. The statistics office warned that the data was subject to more uncertainty than usual. Read more
The euro weakened 0.3% to $1.0407, after losing 6% for the quarter and 8.4% for the year. It fell to a new 7.5-year low against the Swiss franc at 0.9963 francs.
The Japanese yen is in even worse shape, with the dollar up more than 12% this quarter and 18% this year to 137 , its highest since 1998.
Oil prices, which soared in 2022 along with most commodity prices, fell slightly on Thursday amid concerns about an unusual slowdown in U.S. gasoline demand.
OPEC and OPEC+ end two days of meetings Thursday without expecting to be able to pump much more oil despite US pressure to increase quotas. Read more
Brent slid 0.5% to $115.63 a barrel, while U.S. crude fell 0.46% to $109.29.
Bitcoin slid 5% and was briefly below $19,000.
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Additional reporting by Wayne Cole in Sydney Editing by Gareth Jones
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