Global markets sank on Thursday, in many cases giving up the day before’s gains as investors came to grips with policymakers’ measures to curb inflation by raising interest rates, and the effects higher borrowing costs could have on economic growth. .
Wall Street futures suggested stocks would fall when markets open, with the S&P 500 falling 2.3 percent. That would more than offset Wednesday’s gains as the market rebounded after the Federal Reserve announced its largest rate hike in decades, a sign that it was willing to put in some economic pain to bring prices under control. Wednesday’s rise broke a string of five daily losses, but US stocks look poised to resume their decline and slide further into a bear market.
Fed chairman Jerome H. Powell stressed that causing a recession is not part of the plan, but economists are skeptical. Analysts at Bank of America said the Fed predicted an “incredibly soft landing” for the economy, while their counterparts at Deutsche Bank called the central bank “too optimistic” in its thinking it can tame inflation without triggering a recession.
Treasury yields, a measure of borrowing costs, fell after the Fed suggested it wouldn’t make a habit of super-large rate hikes, but rose again during early trading Thursday, with traders guessing that interest rates would have to rise much higher to deal with it. with ongoing inflation. The 2-year Treasury bill traded at 3.38 percent, about half a point higher than a week ago.
In Europe, the Stoxx 600 index fell 2 percent in early trading, putting it on track for its seventh decline in eight days. The drop wiped out all gains the day before, after the European Central Bank convened an unscheduled meeting to address growing concerns about the “fragmentation” of euro-zone markets.
On Thursday, Switzerland’s central bank raised its interest rate for the first time in 15 years, a more aggressive move than many had expected – the country’s benchmark index, the SMI, fell 2.6 percent. Investors also prepared for the Bank of England’s announcement of the latest in a series of rate hikes, with the FTSE 100 falling more than 2 percent.
Shares in Asia closed mixed, with Japan’s Nikkei 225 up 0.4 percent, Korea’s KOSPI 0.2 percent and Hong Kong’s Hang Seng losing more than 2 percent.
