Global markets fall sharply on worries about rates, 'weakening' economy
Premium- Global markets fell sharply on the worries about rates and the ‘weakening’ economy
Markets tumbled across the world on Friday as more signs that the global economy is “weakening", just as central banks raise the pressure even more with additional interest rate hikes. The S&P 500 collapsed 1.7 per cent after a preliminary report suggested US business activity is still shrinking. It, however, also said that it was shrinking as badly as it was in earlier months. though not quite as bad as in earlier months.
The European stocks fell even more after preliminary data there suggested the worst monthly contraction since the start of 2021.
To check the high inflation and in hopes of cutting it, the Federal Reserve, and other central banks circling the world aggressively hiked interest rates this week. But these moves also put brakes on their economies, threatening recessions as growth slows worldwide.
According to the reports, crude oil prices also crashed on worries that a weaker global economy will burn less fuel. Cryptocurrency prices also fell sharply. The cryptocurrency prices fail as the higher interest rates tend to hit hardest the investments that look the priciest or the riskiest. The gold prices also fell worldwide.
For S&P 500, the collapse was the fifth losing week in the past six. The Dow Jones Industrial Average crashed 1.3 per cent to 29,668 and the Nasdaq fell 2 per cent. The US crude oil prices also slumped 5.6 per cent.
On Wednesday, the Federal Reserve lifted its benchmark rate to a range of 3 per cent to 3.25 per cent. In its forecast, the Federal Reserve released a forecast showing the benchmark rate expected to be 4.4 per cent by the year’s end.
Treasury yields, which affect rates on mortgages and other kinds of loans, have climbed to multiyear highs as interest rates rise. The 2-year Treasury also follows the expectations for Federal Reserve action. It rose to 4.17 per cent from 4.12 per cent on Thursday.
Currently, it is trading at its highest level since 2007. The 10-year Treasury which affects the mortgage rates rose to 3.72 per cent.
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Meanwhile, Central banks in Britain, Switzerland, Turkey and the Philippines have hiked their interest rates. The development came as the Fed hiked its key rate. This was the fifth time that the Fed increased the key rate and also indicated that more hikes will be announced in the future.
(With agency inputs)
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