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Global stocks fell on Friday, capping their worst week since March as investors in the United States and Europe worried about the prospect of further interest rate hikes and a possible recession.
The FTSE All-World Index, which tracks the world’s largest companies, fell 1%, taking its weekly decline to 2.2% – its worst performance since the start of the US regional banking crisis in March with the collapse of Silicon Valley Bank.
Europe’s Stoxx 600 and Wall Street’s benchmark S&P 500 also suffered their worst week since March. The S&P 500 fell 0.8% for the day and 1.4% for a week shortened by the June 19 U.S. holiday on Monday. The Stoxx 600 slid 0.3% on Friday and 2.6% for the week.
The moves followed a week of hawkish signals from policymakers in the United States and Europe, as central banks prioritized their fight against stubbornly high inflation, even as several economic indicators pointed to a slowdown in inflation. two sides of the Atlantic.
“Today’s selloff shows you that the market hadn’t quite accepted that we are now in a very different economic regime,” said Georgina Taylor, head of multi-asset at Invesco.
Investors who had grown accustomed to “policymakers coming to the rescue” in tough economic times “all have to adapt, and that’s what keeps markets volatile,” she added.
Central banks in Switzerland, Norway and the United Kingdom raised their benchmark interest rates this week, while US Federal Reserve Chairman Jay Powell signaled that two more quarter-on-quarter rate hikes points were likely by the end of 2023.
Meanwhile, a number of closely watched business surveys on Friday showed economic activity stalled in the United States and the eurozone, echoing analysts’ warnings that climate control policies inflation could result in recession in major economies around the world.
Ricardo Amaro, senior economist at Oxford Economics, said “today’s report suggests tight monetary policy is increasingly leading to weak demand” in Europe. He described the pace of the decline as “worrying” but said the latest surveys may “overstate” the extent of the weakness as other data had not yet shown the same trend.
Investors avoided risky assets for the safety of government bonds. The yield on the benchmark 10-year US Treasury fell 0.06 percentage points to 3.74%, while the yield on the 10-year German Bund fell 0.14 percentage points to 2.35 %. Bond yields fall when prices rise.
Earlier, Japan’s Topix index fell 1.4% after a major indicator of the country’s consumer prices rose at its fastest pace in 42 years in May, raising challenges for the central bank while inflation turned out to be more rigid than expected.
The core consumer price index, which excludes volatile energy and food prices but includes alcoholic beverages, rose at an annual rate of 4.3%, the fastest pace since June 1981 .