Stocks retreat as dollar hits two-decade highs

  • US stock futures down 0.6%
  • European stocks head for worst week in 2 months
  • The MSCI Asia ex-Japan index fell by 2.87%

LONDON, May 6 (Reuters) – The U.S. dollar hit a 20-year high and global stocks fell to their lowest in more than a year on Friday as markets priced in further U.S. interest rate hikes , while Asian stocks fell on concerns about the hit to growth from China’s zero COVID policy.

The US currency was heading for its fifth consecutive week of gains after the Federal Reserve raised rates by 50 basis points this week. The market is pricing a more than 90% chance of a 75 basis point hike in June, according to data from Refinitiv.

US payrolls data, due later on Friday, will help traders gauge the strength of the US economy. Economists polled by Reuters predicted data would show the United States added 391,000 new jobs in April, up from 431,000 a month earlier.

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“The trend is still for a strong and very tight labor market, which is fueling wage increases and is a longer-term inflation issue,” said Gergely Majoros, a member of the asset manager’s investment committee. Carmignac. This made it difficult for the Fed to maintain price stability, he added.

“Job creation is still too hot for the Fed to fulfill its mandate.”

The dollar hit a 20-year high at 104.06 against a currency index and gained 0.19% to 130.42 yen, also close to its 20-year high.

The euro fell 0.38% to $1.0499, near recent five-year lows.

The pound fell to its lowest level against the dollar in almost two years after falling 2.2% on Thursday.

The Bank of England raised rates by 25 basis points as expected, but two politicians expressed caution about rushing future rate hikes. Read more

The MSCI Global Equity Index (.MIWD00000PUS) fell 0.52%, to its lowest since February 2021.

U.S. stock index futures fell 0.6% after the Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) both slid more than 3% overnight, and the Nasdaq Composite (.IXIC) lost 4.99% on its biggest day. diving since June 2020.

European stocks (.STOXX) fell more than 1% to their lowest since mid-March and were heading for their worst week in two months. Britain’s FTSE (.FTSE) fell 0.8%.

“We still find ourselves in an environment of slowing growth and we are starting to see evidence that sectors such as US housing are slowing, global PMIs are showing the toll and accumulated savings are being spent,” said Grace Peters. , Head of Investment Strategy EMEA at JPMorgan Private Bank.

“But based on the latest US data, we are comfortable with tracking a spike in inflation in the second quarter.”

US yields rise on expectations of a rapid pace of rate hikes. The yield on US 10-year bonds was 3.063% after crossing 3.1% overnight for the first time since November 2018.

Germany’s 10-year government bond yield hit 1.057%, its highest level since 2014.

MSCI’s broadest index of non-Japan Asia-Pacific stocks (.MIAPJ0000PUS) fell 2.87% to its lowest level since March 16, when Chinese Vice Premier Liu He pushed shares higher. by committing to supporting markets and the economy.

The benchmark is down 4% from last Friday’s close, which would be its worst week since mid-March. The Japanese Nikkei (.N225) bucked the trend, rising 0.69% on its return from a three-day holiday.

Chinese blue chips (.CSI300) lost 2.53%, the benchmark Hong Kong index (.HSI) lost 3.89% and the Chinese yuan fell to an 18-month low in onshore and offshore. ,

China will fight all comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported Thursday, after a meeting of the country’s top decision-making body. Read more

Investors said that appeared to rule out any easing of the zero COVID policy, which is slowing Chinese economic growth and scolding global supply chains.

“The silver lining is the expectation that further Chinese tax measures may be released over the weekend,” said Dickie Wong, director of research at Kingston Securities, the Hong Kong-based brokerage firm. “It’s the only thing that gives Asian markets some support at their current low valuations.”

Oil prices shrugged off worries about global economic growth as worries about tighter supply supported prices ahead of the impending European Union embargo on Russian oil.

Brent crude futures rose 0.29% to $111.78 a barrel. U.S. crude rose 0.23% to $108.51 a barrel.

Gold fell 0.12% to $1,874.7 an ounce.

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Reporting by Carolyn Cohn in London and Alun John in Hong Kong; Editing by Andrew Heavens

Our standards: The Thomson Reuters Trust Principles.

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