Stocks shrink as the dollar rises to its highest level in two decades


  • US stock futures fall 0.6%
  • European stocks headed for worst week in two months
  • MSCI Asia, excluding Japan, fell 2.87%.

LONDON (Reuters) – The U.S. dollar hit a 20-year high and global stocks slumped toward their lowest in more than a year on Friday as markets expected more U.S. interest rate hikes, while Asian stocks slumped on concerns that China’s virus-free policy would hurt growth. corona.

The greenback was heading for the fifth consecutive week of gains after the Federal Reserve raised interest rates by 50 basis points this week. Refinitiv data indicates that the market is pricing in a more than 90% chance, up 75 basis points in June.

US jobs data due later on Friday will help traders gauge the strength of the US economy. Economists polled by Reuters had expected data to show that the United States created 391,000 new jobs in April, compared to 431,000 in the previous month.

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“The trend remains for a very strong and tight labor market, which is fueling wage increases and is a problem for inflation in the long run,” said Gergeli Majoros, investment committee member at Carminiac Asset Management. This, he added, made it difficult for the Fed to maintain price stability.

“Job creation is still too hot for the Fed to fulfill its mandate.”

The dollar hit a 20-year high of 104.06 against a currency index and gained 0.19% to 130.42 yen, also close to a 20-year high.

The euro fell 0.38% to $1.0499, near five-year lows.

The pound fell to its lowest level against the dollar in nearly two years, after falling 2.2 percent on Thursday.

The Bank of England raised interest rates by 25 basis points as expected, but two policymakers have expressed caution against a rush for rate hikes in the future. Read more

MSCI World Stock Index (.MIWD00000PUS) It fell 0.52%, its lowest level since February 2021.

US stock index futures fell 0.6% after the Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) Both are down more than 3% overnight, and the Nasdaq Composite Index (nineteenth) It fell 4.99% in the biggest one-day drop since June 2020.

European stocks (.stoxx) It fell more than 1% to its lowest level since mid-March and is heading for its worst week in two months. UK FTSE Index (.FTSE) It decreased by 0.8%.

“We continue to live in an environment where growth is slowing, and we are starting to see evidence that sectors such as US housing are slowing, global PMIs are showing losses and accumulated savings are being spent,” said Grace Peters, EMEA region president. JPMorgan private bank investment strategy.

“But based on the latest US data, we are comfortable with tracking inflation, which peaked in the second quarter.”

US yields are rising amid expectations of a fast paced rate hike. The yield on another 10-year US bond was 3.063% after exceeding 3.1% overnight for the first time since November 2018.

The yield on German 10-year government bonds rose to 1.057%, the highest level since 2014.

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It fell 2.87 percent to its lowest level since March 16, the day Chinese Vice Premier Liu He boosted shares by pledging to support markets and the economy.

The benchmark is down 4% from last Friday’s close, which would be its worst week since mid-March. Japan’s Nikkei Index (.N225) It bucked the trend, up 0.69% after returning from a three-day vacation.

Chinese blue chips (.CSI300) It fell 2.53%, the Hong Kong index (.HSI) It lost 3.89% and plunged the Chinese yuan to an 18-month low in both the domestic and overseas markets. And

China state television reported Thursday, after a meeting of the country’s highest decision-making body, that China will combat any comments or actions that distort, question or deny the country’s policy in dealing with COVID-19. Read more

Investors said that seemed to rule out any easing in the coronavirus non-proliferation policy, which is slowing Chinese economic growth and disrupting global supply chains.

“The silver lining is the expectation that new Chinese financial measures may emerge over the weekend,” said Dickie Wong, director of research at Hong Kong-based brokerage Kingston Securities. “This is the only thing giving Asian markets some support at their current low valuations.”

Oil prices shrugged off concerns about global economic growth as worries about a supply tightening boosted prices ahead of the imminent European Union ban on Russian oil.

Brent crude futures rose 0.29 percent to $111.78 a barrel. US crude rose 0.23 percent to $108.51 a barrel.

Gold was down 0.12% to $1,874.7 an ounce.

Global Equity and Bond Correlations
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Additional reporting by Caroline Cohn in London and Elon John in Hong Kong; Editing by Andrew Heavens

Our criteria: Thomson Reuters Trust Principles.