Live Markets: Inflation fears, economic slowdown weigh on stocks
13/06/2022 08:57
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INFLATION FEARS, ECONOMIC SLOWDOWN WEIGH ON STOCKS (0748
GMT)
The pan European index .STOXX is down to a three-month low
as a sharp rise in U.S. inflation raised concerns about
aggressive interest rate hikes by the Fed.
Meanwhile, UK shares hit their lowest level in more than
three weeks after data showed Britain's economy unexpectedly
shrank in April, adding to economic growth worries ahead of a
Bank of England policy meeting this week.
The pan-European STOXX 600 .STOXX index is down 1.5%, with
economic growth sensitive sectors among top fallers.
The blue-chip FTSE 100 index .FTSE tumbles 1%, touching
their lowest levels since May 19, while the
domestically-focussed mid-cap FTSE 250 index .FTMC declined to
a one-month low, down 2.2%.
The BoE is expected to raise interest rates by 25 basis
points to 1.25% as it battles red-hot inflation.
(Joice Alves)
*****
WHO WANTS TO BE A CENTRAL BANKER? (0730 GMT)
A half-point U.S. Fed interest rate rise was always a done
deal for Wednesday, but with annual inflation rising at the
fastest since 1981, expectations are growing of a 75 basis-point
move, either this month, or at one of the bank's upcoming
meetings.
That's sent two-year Treasury yields to 15-year highs at
almost 3.2%, having jumped 40 bps last week US2YT=RR . The
dollar has surged back to four-week peaks =USD .
But the combo of inflation and central bank action is
tightening the screws on the economy, sending U.S. consumer
sentiment to a record low in early-June.
With the 2-year/10-year Treasury yield curve back on track
for inversion, recession warnings are flashing US2US10=TWEB .
The Fed is not the only game in town this week, with policy
meetings scheduled in Britain, Japan and Switzerland. The Bank
of England, particularly, has its work cut out, after Monday's
data showed GDP shrank in April.
Near-10% inflation (exacerbated by sterling weakness) will
force the Bank of England stick to plans for a 25 bps rate hike
on Thursday, but navigating the inflation-growth dilemma may
prove trickier than elsewhere urn:newsml:reuters.com:*:nL8N2Y00SH.
Given inflation angst has transformed hitherto-dovish
policymakers into hawks, more surprises may loom; the Swiss
National Bank may decide on Thursday it's time for a hawkish
pivot and Sweden may spring a half-point rate rise on Friday
urn:newsml:reuters.com:*:nL1N2XW1FY.
And Japan? The yen is at 24-year lows beyond 135.20 per
dollar, despite last week's joint government-central bank
statement that raised expectations of currency intervention.
What would really stem yen decline is a softer Bank of Japan
line on yield curve control. urn:newsml:reuters.com:*:nL1N2XX0DS
But there's no such pivot yet; the BOJ plans to buy 500
billion yen ($3.70 billion) of government bonds on Tuesday to
keep 10-year yields within 0.25 percentage points around 0%
urn:newsml:reuters.com:*:nT9N2XI00A.
Throw in Beijing's new "ferocious" COVID-19 outbreak and
global recession increasingly seems like a done deal
urn:newsml:reuters.com:*:nL1N2XZ00Y.
European and U.S. shares are looking at a dour session ahead
and world stocks are at the lowest in three weeks.
Key developments that should provide more direction to
markets on Monday:
- Oil falls, spooked by Beijing COVID warning and inflation
urn:newsml:reuters.com:*:nL1N2Y0062
-French President Emmanuel Macron has a razor-thin edge over the
left, first parliament elections show urn:newsml:reuters.com:*:nL1N2Y006R
-ECB policymakers Robert Holzmann and Luis de Guindos speak
(Sujata Rao)
*****
COVID-19, CHINA COVID MEASURES KNOCK FUTURES (0630 GMT)
European futures are pointing to a start of the day in the
red for bourses across the region mirroring Asia stocks, which
fell on the back of red-hot U.S. inflation and a COVID-19
warning from Beijing.
Worries that rising inflation will encourage the Fed to act
with even more aggressive policy tightening has pushed European
futures .STXEc1 down 1.8%.
Spurring concern of more growth-strangling lockdowns,
Beijing's most populous district of Chaoyang announced on Sunday
three rounds of mass testing to quell a "ferocious" COVID-19
outbreak that emerged at a bar in a nightlife and shopping area
last week. urn:newsml:reuters.com:*:nL1N2XZ00Y
In the meantime, Britain's economy unexpectedly shrank in
April, official figures showed on Monday, three days before the
Bank of England announces the scale of its latest interest rate
response to the surge in inflation. urn:newsml:reuters.com:*:nL8N2Y00SH
(Joice Alves)
*****
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Japan currency https://tmsnrt.rs/3xE3Shf
CPI and wage growth https://tmsnrt.rs/3tpekXd
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