Stocks hit five-week lows ahead of rate hike, lockdowns hit yuan

A broker looks at a chart on his computer screen on the ICAP trading floor in London, Britain January 3, 2018. REUTERS/Simon Dawson

LONDON, April 22 (Reuters) – Global stocks fell to five-week lows and bond yields rose on Friday as investors worried about rate hikes in the United States and the euro zone, while the yuan hit a seven-month low in Shanghai. impact on China’s growth prospects.

US Federal Reserve Chairman Jerome Powell said on Thursday that a half-point interest rate hike would be “on the table” at the May Fed meeting, adding that it would be appropriate “to act a little faster”. Read more

His remarks bolstered market expectations of at least another rate hike of at least half a percentage point next month, and Nomura now expects 75 basis point hikes in June meetings. and July from the Fed, which would be the largest since 1994.

European Central Bank officials said on Thursday that the central bank could start raising eurozone rates as early as July, while Bank of England interest rate chief Catherine Mann said Borrowing costs are likely to rise further. Read more

Eurozone money markets are now fully pricing in a 25 basis point rate hike by July.

“The Fed, the ECB and the Bank of England were pushing hawkish comments on the markets and the markets reacted,” said Monica Defend, director of the Amundi Institute, while adding:

“For the euro zone, we are more skeptical about the fragility of the economic cycle, there is a big potential for recession in Germany and Italy.”

The eurozone is feeling the impact of the war in Ukraine.

The mayor of Mariupol launched a new call on Friday for the “complete evacuation” of the southern Ukrainian city which, according to President Vladimir Putin, is now controlled by Russian forces. Read more

Markets are also eyeing Eurozone and US flash purchasing managers’ data for April, with French data showing that trading activity grew at the fastest pace in more than four years, helped by less than COVID-19 restrictions. Read more

The MSCI Global Equity Index (.MIWD00000PUS) was down 0.41% to its lowest since mid-March and was heading for a 0.7% drop on the week.

S&P futures were down 0.18% after Wall Street indices fell on Thursday, with the S&P 500 (.SPX) down 1.5% and the Nasdaq (.IXIC) down 2%.

European stocks (.STOXX) fell 1.06%, with France’s CAC 40 down 1.39% ahead of Sunday’s presidential poll. Britain’s FTSE (.FTSE) fell 0.52%.

Selling pressure persisted in bond markets, pushing five-year US Treasury yields to 3.049% and two-year yields to 2.7620%, both to their highest levels since late 2018.

German two-year yields hit 0.211%, their highest level since early 2014.

In currency markets, the yuan hit a seven-month low and was on track for its worst week since 2019 as lockdowns in Shanghai dampen growth.

HSBC analysts say a comprehensive package of easing on all fronts, both monetary and fiscal, from Beijing is needed, including easing measures in the real estate sector, which has been hit hard by the restrictions on access to credit.

The dollar fell 0.25% against the yen to 128 after talks of joint Japanese and US currency intervention, although the euro fell 0.29% against the dollar to 1, $0805, giving up Thursday’s rebound as nerves over Sunday’s French presidential election kick in.

The US dollar index rose 0.26% to recent two-year highs.

The pound fell to its lowest level since the end of 2020 against the dollar, after British retail sales fell more than expected in March.

MSCI’s broadest Asia Pacific ex-Japan equity index (.MIAPJ0000PUS) fell 1% to a five-week low, weighed down by a 1.6% loss for the resource-rich Australian index ( .AXJO) and a 0.86% drop in South Korean stocks (.KS11).

The Japanese Nikkei (.N225) fell 1.63%.

Oil prices weakened, weighed down by the prospect of interest rate hikes, weaker global growth and COVID-19 lockdowns in China that hurt demand, even as the European Union weighed a ban on Russian oil.

Brent crude futures were down 55 cents, or 0.57%, at $107.86 a barrel, while US West Texas Intermediate (WTI) crude futures fell 50 cents, or 0.48%, to $103.30.

Spot gold was last down 0.09% at $1,949.90 an ounce.

Additional reporting by Tom Westbrook in Singapore; Editing by Edwina Gibbs, Christian Schmollinger and Tomasz Janowski

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