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NEW YORK, Jan 14 (Reuters) – Global stock markets stumbled again on Friday and U.S. Treasury yields rose as cautious investors considered impending U.S. interest rate hikes and uncertainty over their impact on the economy.
A warning from the biggest U.S. bank JPMorgan Chase & Co (JPM.N) that its future profitability could fall below a medium-term target this year has cast a new veil over the U.S. stock market. Read more
By mid-afternoon, the MSCI Global Equity Gauge (.MIWD00000PUS) was down 1%. The pan-European STOXX 600 index (.STOXX) closed down 1.01% and had its worst week since Nov. 26, weighed in part by falling tech stocks.
In the United States, the Dow Jones Industrial Average (.DJI) fell 1.15%, the S&P 500 (.SPX) lost 0.86% and the Nasdaq Composite (.IXIC) fell 0.7% .
“We are now entering a period where the Federal Reserve will engage in an unprecedented experiment: raising interest rates to zero and reducing the size of its balance sheet in the same year,” said Nicholas Colas, co-founder of DataTrek. . To research.
“The market is always wondering what results will come from their decisions,” Colas said.
In line with rate hike expectations, yields on benchmark 10-year Treasuries jumped to 1.771%, rebounding to a two-year high of 1.8080% hit earlier this week. Two-year Treasury yields climbed to 0.9710%, a level last seen in February 2020.
European bond yields also rose in choppy trading as investors remained focused on central bank monetary policy tightening, although sharp declines in Germany’s benchmark 10-year yield earlier this week led it to record its biggest weekly decline in 10 weeks.
Meanwhile, the yield on five-year Japanese government bonds hit its highest level since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers would debate when to could begin a possible rise in interest rates.
Such a move could come before inflation even hits the bank’s 2% target, sources said. Read more
The dollar, which was hit by a three-day selling spree as investors bet that rate hike expectations are already priced into the currency, finally stabilized on Friday.
The dollar index, which measures the greenback against a basket of six currencies, rebounded 0.39% to 95.207, moving further away from a two-month low hit this week.
A rebound in the dollar weighed on the euro, which lost 0.39% to 1.14070.
The British pound also slipped 0.27% to 1.36710, taking a breather after this week’s rally that pushed it to a 2.5-month high.
GDP data on Friday showed Britain’s economy grew faster than expected in November and its output finally rose above its level before the country entered its first COVID-19 lockdown. Read more
Asian stocks fell overnight after Fed Governor Lael Brainard on Thursday became the latest and longest-serving U.S. central banker to signal that the Fed will hike rates in March. Read more
Other Fed officials also showed willingness to raise rates, after data this week showed US consumer prices jumped 7% year-on-year. Read more
Against equity market weakness, oil futures rose again on Friday to be on track for a fourth weekly gain, boosted by supply constraints.
Brent crude futures rose 1.9% to near a two-and-a-half-month high at $86.09 a barrel. U.S. West Texas Intermediate crude jumped 2.2% to $83.95.
Rising bond yields weighed on non-performing gold, with spot gold down 0.28% at $1,817.02 an ounce.
“It is clearly the impact of tighter monetary policy that is being felt in the markets here,” said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors.
Paillat, who expects at least four rate hikes from the Fed this year, said it was “almost done” for the tightening cycle to begin in March.
“What matters in the next few days will be more revenue,” he added. “There is still some room for earnings to surprise on the upside.”
Reporting by Koh Gui Qing and Elizabeth Howcroft; edited by Jonathan Oatis
Our standards: The Thomson Reuters Trust Principles.
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