GLOBAL MARKETS-Stocks tumble on inflation fears, Treasury yields jump

U.S. Treasury yields jumped and global equity markets tanked on Thursday, erasing the prior day's rally on Wall Street, as investors worried aggressive central bank policies around the world to tamp down inflation will likely shackle growth.

U.S. Treasury yields jumped and global equity markets tanked on Thursday, erasing the prior day's rally on Wall Street, as investors worried aggressive central bank policies around the world to tamp down inflation will likely shackle growth. The rout on Wall Street snuffed a rally in European stocks as fears of a recession, as the Bank of England suggested after it hiked rates, squashed enthusiasm from Federal Reserve Chair Jerome Powell's remarks on Wednesday. He said policymakers were not considering 75 basis-point moves in the future.

The yield on 10-year Treasury notes rose 14.7 basis points to 3.062%. But inflation-hedge gold rose as Powell also emphasized risks to the economy from soaring inflation. "It's a very messy environment for investors right now," said Anthony Saglimbene, global market strategist at Ameriprise Financial. "There's an overall negative sentiment in the market."

Markets will remain volatile until there is a clear picture on Fed rate policy and its trajectory later this year, he said. Investors are "worried that when we get to the back half of this year, the Fed is going to be so aggressive with raising interest rates that they're going to take the economy into a recession."

Worries about fast-paced rate increases at a time of China's COVID lockdowns and the war in Ukraine to slow surging inflation have heavily weighed on stock markets this year. MSCI's gauge of stocks across the globe shed 2.65% and the pan-European STOXX 600 index closed down 0.70%, after opening 1.84% higher.

On Wall Street, the Dow Jones Industrial Average fell 3.33%, the S&P 500 lost 3.65% and the Nasdaq Composite dropped 5.05%. Britain's pound and government bond yields fell sharply after the BoE raised rates to their highest since 2009 to counter inflation heading above 10% and warned the UK economy was at risk of recession.

Sterling was last at $1.2346, down 2.18% on the day, while the euro fell 1.01% to $1.0514 after dire German industrial orders data on Thursday. German industrial orders fell more than expected in March, driven mainly by declining orders from abroad as the war in Ukraine hit manufacturing demand in Europe's biggest economy.

"The German economy is programmed for a downturn," said Thomas Gitzel, chief economist at VP Bank. "The war in Ukraine, the supply chain problems and high rates of inflation are spoiling companies' appetite for investment," he said, adding that a recession was becoming increasingly likely.

The dollar index rose 1.18% after falling sharply on Wednesday following the Fed's rate hike. It is up more than 7% so far this year. China's battered shares recovered some ground, gaining 0.7% as mainland markets resumed trade after a three-day holiday.

Investors also cheered a pledge by China's central bank for more monetary policy support to help businesses badly hit by the latest COVID-19 outbreak. U.S. gold futures settled up 0.4% at $1,875.70 an ounce, after paring gains of more than 2%.

Oil prices rose as a stronger dollar offset supply concerns after the European Union's plans for new sanctions against Russia, including an embargo on crude in six months. Traders noted OPEC+ again rebuffed consumer calls for a faster pace of output rises. U.S. crude futures rose 45 cents to settle at $108.26 a barrel and Brent settled up 76 cents at $110.90 a barrel.

 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)