Image: Reuters Berita 24 English - On Thursday, global markets slumped and the dollar recovered its footing, owing to fears about the impa...
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| Image: Reuters |
Berita 24 English - On Thursday, global markets slumped and the dollar recovered its footing, owing to fears about the impact of rising inflation and a policy tightening outlook from global central banks.
With an unexpected 50 basis point boost, the Swiss National Bank hiked its policy interest rate for the first time in 15 years, dampening investor sentiment and sending the safe-haven franc substantially higher.
The MSCI global market index had given up early gains and was down 0.3 percent by 0803 GMT. The early favourable reaction to the Federal Reserve's widely anticipated 75-basis-point rate hike also faded.
The Bank of England is also anticipated to hike rates to combat inflation later on Thursday, a day after the European Central Bank promised fresh help to calm a bond market collapse.
The STOXX 600 index in Europe was down more than 1%, while S&P 500 e-mini futures were down 1.8 percent.
"There is a great deal of anxiety. Following the Fed's initial relief, markets appear to have realised that a 75-basis-point rate hike is still on the table "Giuseppe Sersale, portfolio manager and strategist at Anthilia in Milan.
"Even if the Swiss central bank unexpectedly hikes by half a point, markets believe that central bank tightening is still very aggressive. There isn't much to be cheerful about these days "He went on to say.
The Federal Reserve raised interest rates for the first time since 1994 on Wednesday. Officials at the Federal Reserve expect more gradual increases this year, with the federal funds rate expected to reach 3.4 percent by the end of the year.
According to Fed predictions, U.S. economic growth would decline to a below-trend rate of 1.7 percent in 2024, and policymakers will lower interest rates.
On Friday, data indicated a stronger-than-expected rise in US inflation in May, as well as a University of Michigan survey showing consumers' five-year inflation forecasts soaring to their highest level since June 2008.
Fed Chair Jerome Powell said the survey was "very eye-catching" during a press conference following the Fed's last two-day policy meeting.
"(Inflation expectations) are beginning to appear excessive. That, I believe, is one of the reasons Powell wanted to do a 75... And I believe they will return in July "According to Joseph Capurso, the Commonwealth Bank of Australia's head of foreign economics.
"They need to bring inflation down. They're so far behind the times that it's almost comical."
MSCI's broadest index of Asia-Pacific stocks outside of Japan sank 1.1 percent, wiping away previous gains.
The dollar regained its ground in the Asian session after sliding from a 20-year high following the Fed meeting.
The global dollar index, which measures the value of the dollar against a basket of six currencies, was up 0.5 percent at 105.29 at the time of writing.
The Swiss currency rose as the Swiss National Bank surprised investors by raising interest rates significantly. It was last trading at 1.0225 versus the euro, up nearly 1.6 percent, and 0.9848 against the dollar, up 1%.
Treasury yields increased on Thursday, with the 10-year yield rising to 3.362 percent from 3.291 percent on Wednesday.
As investors concentrated on restricted supplies, oil prices recovered from a severe slump. Brent crude rose 0.3 percent to $118.8 per barrel, while U.S. crude rose 0.2 percent to $115.6 per barrel.
As the dollar strengthened, gold fell marginally. Gold was recently trading at $1,829.4 per ounce, down 0.2 percent from its previous close. [GOL/]
