Risk-Off Sentiment Returns With Focus on Inflation: Markets Wrap

(Bloomberg) — Risk-on sentiment returned to markets Thursday as concerns about inflation and the risk of a global recession overshadowed the Bank of England’s move to restore calm.

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The pound posted a two-day gain and UK gilt yields rose as Prime Minister Liz Truss championed a giant package of unfunded tax cuts that sent markets tumbling. The dollar rose against all its Group of 10 peers and Treasuries fell as investors focused on expectations that the Federal Reserve will continue to offer aggressive interest rate hikes.

European bond yields also rose as investors digested the latest inflation data and comments from European Central Bank officials, while top German research institutes said the world’s largest economy region will likely contract by 0.4% next year due to the impact of the energy crisis. Eurozone economic confidence fell to the lowest level since 2020.

US stocks and futures fell as Hong Kong’s Hang Seng technology index hit its lowest level since its inception. European shares are extending a selloff that has sent valuations to their lowest level since 2012 and well below the average over the past decade.

“Other than the dollar, there aren’t many assets that are trading constructively,” said Julia Raiskin, head of Asia-Pacific markets at Citigroup Inc. “The markets are very pessimistic. Investors are quite on the sidelines.”

Former Bank of England governor Mark Carney accused the UK government of “undercutting” the country’s economic institutions and said its fiscal plans were to blame for the fall in the pound and bonds. His comments are the latest in a series of international criticisms and warnings, including from the International Monetary Fund and rating firm Moody’s Investors Service.

Simon Wolfson, the head of Next Plc and a Conservative peer, also appeared to blame the Tory government for a fall in the pound and a worsening outlook for UK inflation, which the company cited as reduce sales and profit orientation.

Shares in Next fell as much as 9.8% in London and an index of retailers fell to the lowest level in a decade. In other notable moves, Porsche AG surged after the largest initial public offering in Europe in more than a decade.

Investors are grappling with threats posed by discordant moves by central banks in recent days, with Fed officials adamant on further monetary tightening, the BOE unveiling a 65 billion pound ($71 billion ) to support government debt and authorities in Asia trying to shore up. weakening currencies.

“The central bank is in a very difficult position right now,” Kayne Anderson Rudnick portfolio manager and senior research analyst Julie Biel said of the BOE in an interview with Bloomberg TV. “Everybody has been kind of backed into a corner watching the volatility and the market reaction.”

Fed officials continued to weigh in on the central bank’s dovish outlook, with Atlanta President Raphael Bostic saying he supports raising rates by another 1.25 percentage points later this year . Meanwhile, the People’s Bank of China said it will accelerate the use of specific loans to guarantee real estate project deliveries and increase such loans when necessary.

In other news, the Swedish Coast Guard command center identified a new gas pipeline leak in the Baltic Sea. The president of the European Commission, Ursula von der Leyen, announced an eighth package of sanctions against Russia for its attempt to annex more territory to Ukraine. The measures will include a price cap on Russian oil exports.

How much damage is a strong dollar causing? That’s the topic of this week’s MLIV Pulse poll. It’s short and we don’t collect your name or any contact information. Click here to share your views.

Key events this week:

  • Initial US Jobless Claims, GDP, Thursday

  • The Fed’s Loretta Mester and Mary Daly speak at events Thursday

  • China PMI, Friday

  • Euro zone CPI, unemployment, Friday

  • US Consumer Income, University of Michigan Consumer Sentiment, Friday

  • Lael Brainard and John Williams of the Fed speak on Friday

Some of the main movements in the markets:


  • The Stoxx Europe 600 was down 1.5% at 10:05 a.m. London time

  • S&P 500 futures fell 1.1%

  • Nasdaq 100 futures fell 1.3%

  • Dow Jones Industrial Average futures fell 1%

  • The MSCI Asia Pacific index fell 1.7%

  • The MSCI Emerging Markets Index fell 1.8%


  • The Bloomberg Dollar Spot index rose 0.6%

  • The euro fell 0.7% to $0.9671

  • The Japanese yen fell 0.4% to 144.72 per dollar

  • The offshore yuan fell 0.5% to 7.2010 per dollar

  • The British pound fell 0.7% to $1.0808


  • Bitcoin fell 1% to $19,377.95

  • Ether fell 1.8% to $1,326.33

good ones

  • The 10-year Treasury yield advanced 11 basis points to 3.84%

  • Germany’s 10-year yield advanced 14 basis points to 2.26%

  • UK 10-year yield advanced 13 basis points to 4.14%


  • Brent crude fell 1.5% to $87.94 a barrel

  • Spot gold fell 0.9% to $1,645.27 an ounce

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