Global markets slump after central banks hint to keep rates higher for longer

MSCI’s gauge of stocks across the globe shed 1.19%.

The US Federal Reserve, the Bank of England, and other central banks in Europe have warned that more interest rate hikes could come further as they continue to worry about inflation.

Rising bond yields across the world also pushed the global markets down. The benchmark US treasury yields hit a 10-year high, while Euro zone bond yields advanced.

US stocks

On Wall Street on Thursday, all three major US stock indices ended sharply lower.

The S&P 500 lost 72.79 points, or 1.64%, at 4,329.91 points. The Nasdaq Composite fell 246.56 points, or 1.83%, at 13,222.56. The Dow Jones Industrial Average shed 373.50 points, or 1.08%, at 34,067.38. 

On Wednesday, the US central bank left the Fed funds target rate unchanged at 5.25%-5.50%.

The 10-year treasury yield rose at 4.48% from 4.40% late Wednesday. The 2-year treasury yield slipped at 5.14% from 5.17% late Wednesday after climbing earlier in the day.

Shares of Amazon fell 4.4%, Nvidia dropped 2.9% and Telsa lost 2.6%.

Cisco fell 3.9% after announcing that it would buy cybersecurity company Splunk for roughly $28 billion.

FedEx rose 4.5% after reporting stronger profit for the latest quarter. 

Currencies

The US dollar dropped at 147.54 Japanese yen from 148.03. It also fell against the euro at $1.0661 from $1.0686.

Some analysts believe that after the latest moves by the central banks, there was now more uncertainty about the interest rates infront of the global markets.

On Friday also global markets is expected to witness the same monetary policy stance from the Bank of Japan as others have showed. BoJ is widely expected to stick to negative rates at a meeting.

At the People’s Bank of China, recent better economic prospects allowed it to keep rates on hold on Thursday.

Europe

European shares declined more than 1% on Thursday following the selloff spree in global markets.

The pan-European STOXX 600 index ended 1.3% lower.

Britain’s FTSE 100 edged down 0.7% at 7,678.62. Germany’s DAX fell 1.3% at 15,571.86. France’s CAC 40 dipped 1.6% at 7,213.90.

Travel and leisure stocks shed 3.2%.

Mining index dipped 2.6% as metal prices fell on a stronger US dollar.

Technology stocks dropped 1.3% and real estate slumped 1.2%.

Euro zone bond yields surged higher after the US Fed and the Bank of England  left ley rates unchanged.

“We will need to keep interest rates high enough for long enough to ensure that we get the job done,” Bank of England governor Andrew Bailey said on Thursday.

The Swiss National Bank also kept its policy interest rate unchanged, while Sweden and Norway’s central banks raised their rates by a quarter percentage point. 

Swiss stocks fell 0.6%, Sweden shares lost 1.1%, and Norway was down 0.9%.

Asia

Asian share markets tumbled on Thursday.

Hong Kong’s Hang Seng Index fell 1.3% at 17,655.41. China’s Shanghai Composite: lost 0.8% at 3,084.70.

Nikkei 225 edged down 1.4% at 32,571.03. South Korea’s benchmark Kospi closed down 44.77 points, or 1.75%, at 2,514.97.

Australia’s S&P/ASX 200 index ended 1.4% lower at 7,065.20. New Zealand’s benchmark S&P/NZX 50 index shed 0.1% at 11,318.74. 

Energy prices 

Brent crude for November delivery fell 23 cents at $93.30 a barrel on Thursday. The US crude oil benchmark for November delivery lost 3 cents at $89.63 a barrel.

Natural gas for October delivery fell 12 cents at $2.61 per 1,000 cubic feet.

Bullion

Gold for December delivery plunged $27.50 at $1,939.60 an ounce. Silver for December delivery fell 15 cents at $23.69 an ounce.

Updated: 22 Sep 2023, 02:21 AM IST