Global stocks fall as European stocks post weekly loss

NEW YORK/LONDON, Dec 16 (Reuters) – Global equities remained near a month low on Friday as Wall Street extended its rout and government bond markets came under renewed selling pressure, as central bankers’ hawkish tone and weak data stoked recession fears.

Oil prices fell more than $2 a barrel, swept away in the wider rout. Gold prices suffered their biggest weekly loss in four weeks after the Federal Reserve indicated it was not done raising rates.

The Fed was among a string of central banks that raised interest rates and signaled they were struggling to get inflation under control this week.

Eurozone bond yields jumped a day after the European Central Bank promised further monetary tightening to fight inflation.

US yields also rose, catching up with the global bond sell-off.

Wall Street extended Thursday’s rout, in which stocks suffered their biggest daily percentage decline in weeks, after data showed U.S. business activity contracted further in December , but the slowdown in demand has helped to cool inflation considerably. Read more

The data “confirmed Wall Street fears that the economy is rapidly heading into a recession,” said Edward Moya, principal analyst at OANDA.

The Dow Jones Industrial Average (.DJI) fell 1.29%, the S&P 500 (.SPX) lost 1.38% and the Nasdaq Composite (.IXIC) fell 1.17% at 2:13 p.m. EST (1913 GMT).

European stocks posted their biggest weekly loss since September. The STOXX 600 index (.STOXX) stabilized 1.2%, slipping to a weekly loss of almost 3.3%.

The MSCI World Stock Index (.MIWD00000PUS) fell 1.3%, languishing near its lowest in more than a month.

S&P Global’s Flash Purchasing Managers’ Index showed economic activity in the euro zone contracted for the sixth consecutive month in December, although the deceleration also slowed to its slowest pace in four month.

In Asia, Japan’s Nikkei index closed at its lowest in more than a month (.N225) and MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) had its worst week ever. two months.

The dollar index edged up 0.6%, while the euro fell 0.12%.

This week’s hawkish message from central bankers put an abrupt end to optimism that interest rates were on the horizon.

“Central banks have dealt a blow to rebounding markets in anticipation of policymakers becoming dovish on inflation and interest rates,” said Sunil Krishnan, head of multi-asset at Aviva Investors.

The ECB issued a 50 basis point hike like the Fed. The two opted for a lower increase this time, but signaled that there were more increases to come.

His hawkish message sparked a second day of strong selling in European bond markets where yields on German benchmark 10-year bonds jumped.

The yield on German two-year rate-sensitive bonds hit 2.503% on Friday, its highest level since 2008.

“We now expect the ECB to drop to 3.25% (including 50bps in March) and the Fed to 5.25%, which argues for continued pressure on yields and spreads,” said Christoph. Rieger, Head of Rates and Credit Research at Commerzbank.

GROWTH CONCERNS

In China, where markets are jittering over an uncertain reopening, relief at the apparent resolution of a longstanding accounting access dispute with the United States has not been enough to bolster sentiment. .

Meanwhile, Japan’s manufacturing activity shrank at the fastest pace in more than two years in December, while U.S. retail sales fell more than expected in November.

The prospect of further global monetary tightening has left investors worried about longer-term growth.

In commodities, spot gold prices rose 0.8% but were on course to end the week lower. Gold futures rose 0.7% to $1,800.20 an ounce but ended the week with their biggest weekly loss in four weeks.

Interest rate increases increase the opportunity cost of holding non-performing bullion.

Oil prices fell, with Brent futures down 2.59% and US crude down 2.3%.

Additional reporting by Naomi Rovnick in London and Tom Westbrook in Singapore; Editing by Raissa Kasolowsky, Emelia Sithole-Matarise and Cynthia Osterman

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