Global stock markets falter on central bank inflation concerns

WASHINGTON, Jan 28 (Reuters) – Global stock markets fell again on Friday as investors worried about murky signals from central banks and rising tensions between Western powers and Russia, leading to a worst start to the year for equities.

Strong earnings from Apple buoyed struggling US and tech markets, but traders struggled to draw a line under a global selloff that had taken firm root.

The pan-European STOXX 600 index (.STOXX) fell nearly 1.61%, on track for its fourth straight weekly decline, as volatile US stocks suffered from a sell-off as traders weighed concerns over the tightening of monetary policy by the Federal Reserve.

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Friday’s session opened slightly higher after economic reports eased initial inflation concerns.

MSCI’s 50-country main world index (.MIWD00000PUS) lost 0.04%, after earlier losing around $7 trillion in value, putting it on the verge of its worst January since the global financial crisis. of 2008.

The dollar, meanwhile, consolidated its gains on Friday and was on course for its biggest weekly gain in seven months against other major currencies as markets priced a year ahead of aggressive U.S. interest rate hikes. /FRX.

“The big problem is the Fed, which is clearly in a tightening cycle. Financial market support is not on the central bank’s agenda,” said Tim Ghriskey, senior portfolio strategist at Ingalls. & Snyder in New York.

“The only question is whether the markets have fully digested Powell’s advice during his press conference. … I would expect equity and bond markets to bottom at some point fairly quickly,” he added.

Global stocks suffer January plunge

The Fed signaled on Wednesday that it would likely raise rates in March, as widely expected, and reaffirmed its intention to end its pandemic-era bond purchases that month before launching a significant cut. of its assets.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell 0.24%, the S&P 500 (.SPX) gained 0.28% and the Nasdaq Composite (.IXIC) added 0.74%.

The prospect of faster or bigger hikes in US interest rates and a possible withdrawal of stimulus sent the dollar index up 0.01% to 97.232, with the euro also up just 0. .05% to 1.1149.

In the major government bond markets that drive global borrowing costs, the yield on benchmark 10-year Treasuries fell 2.2 basis points to 1.786%, the preferred gauge of inflation. the Fed, the personal consumption expenditure (PCE) price index, no longer rising. than had been planned.

In the 12 months to December, the PCE rose 5.8%. This was the strongest gain since 1982 and followed a 5.7% year-on-year increase in November. Read more

The two-year US Treasury yield, which generally moves in line with interest rate expectations, fell 2.8 basis points to 1.164%, after starting the year around 0.75% .

The British pound hit a near 23-month high against the euro as investors expect the Bank of England to hike rates next week and follow a path of rapid monetary tightening in 2022.

Investors were digesting a European Union document that showed EU-based foreign banks may need to hold more capital and liquidity under rule revisions being considered by bloc member states.

Italy was also the center of attention, where bond yields rose as its parliament struggled to elect a new president.

Global bond yields rise

OIL PRESSURE

Oil prices hit seven-year highs on inflation data and as geopolitical tensions continue to raise fears that the Ukraine crisis could disrupt energy markets.

US President Joe Biden and his EU counterpart Ursula von der Leyen pledged to cooperate to ensure Europe’s and Ukraine’s energy security amid the stalemate sparked by the Russian troop rally at the Ukrainian border. Read more

U.S. crude rose 1.29% to $87.73 a barrel and Brent to $90.64, up 1.46% on the day.

“Where Brent crosses the $90 level, we see some selling out of a sense of accomplishment, but investors start buying again when prices drop a bit as they remain cautious about possible supply disruptions due to of rising geopolitical tensions,” said Tatsufumi Okoshi, senior economist. at Nomura Securities.

“The market expects supply to remain tight as OPEC+ appears to be maintaining the current policy of gradually increasing production,” he said.

The market is focused on a February 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies, a group known as OPEC+. It is likely to stick to a planned increase in its oil production target for March, several sources at the group told Reuters. Read more

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Apple sour, boiling oil

Additional reporting by Marc Jones and Rowena Edwards in London Editing by Andrew Cawthorne, Mark Heinrich and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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