Global stock rally fades as recession worries linger
Futures markets indicated that Wall Street’s benchmark S&P 500 share index would be down 0.2% on the opening bell, having gained 1.5% in the previous session. Tech-focused Nasdaq 100 contracts also fell 0.2 percent.
Softer gas prices lowered U.S. consumer expectations for 12-month inflation to 6.7 percent this month, the lowest since September 2021, data showed on Wednesday.
Meanwhile, a separate survey yesterday showed US consumer confidence rose to its highest level since April, beating the expectations of economists polled by Reuters, while strong results from Nike Raised Wall Street too.
“We are still in a bear market,” said Luca Paolini, chief strategist at Pictet Asset Management. “You get the odd short rally and then it goes flat. There’s very little certainty. The only certainty is that a recession is going to happen.
The S&P 500 is down about 19% to end the year, while MSCI’s broad gauge of global stocks (.MIWD00000PUS) has fallen by the same amount in eight of the past 12 months.
The Federal Reserve raised its benchmark interest rate by 50 basis points in December, its seventh hike of the year. Money managers see the Fed’s tightening campaign as likely to push the U.S. economy into recession, which should lead to a reduction in stubbornly high inflation.
“The view is that we are approaching the end of rate hikes and there will probably be a (Fed) pivot,” said Anish Grewal, portfolio manager at hedge fund Enora Global in London.
“Markets are very calm about that,” he said, but “expectations are that we will get to around September next year and we are in a rate cut mode.”
The dollar index, which measures the U.S. currency against a basket of six others, fell as much as 0.5 percent earlier in the day, before recovering to trade flat. The index is down about 2 percent so far this month.
Sterling eased 0.3% to $1.205 after data showed the UK economy shrank more than first thought in the third quarter.
Against the Japanese yen, the dollar eased 0.3 percent to trade around 132.12 yen, having hit a four-month low earlier this week after the Bank of Japan, the world’s largest lender, said it would cut interest rates through 2022. The big central bank has taken a surprisingly defiant turn. .
Investors continued to associate the BOJ’s shock decision to allow government bond yields to rise with an adjustment to its controversial yield curve control policy.
Ten-year government bond yields rose to 0.483% this week, the highest since July 2015 and within the BOJ’s new range of 0.5%.
“Yield increases and a further strengthening of the yen will reduce the value of assets held by Japanese investors,” Capital Economics analysts said.
Capital Economics also now expects the dollar to fall to 125 yen next year.
In US fixed income, the benchmark 10-year Treasury yield fell 3 basis points to 3.656% as inflation expectations eased. This key debt yield, which determines the pricing of debt worldwide, recently exceeded 4.2% as of the end of October.
Oil prices rose after data showed a bigger-than-expected draw in U.S. crude inventories after a massive blizzard blanketed much of the United States and fuel trips. It was expected to affect related demand.