Global stocks fall on fear of hawkish central bank hikes

LONDON, Feb 22 (Reuters) – Global equities traded around their lowest levels in more than a month on Wednesday and U.S. Treasury yields remained at their highest since November amid renewed fears over inflation and interest rates weighed on market sentiment.

MSCI’s broad global equity index (.MIWD00000PUS) fell 0.4% to head for its lowest since Jan. 20, while the broad gauge Asia-Pacific ex-Japan equity index (. MIAPJ0000PUS) fell 1.3% to its lowest since Jan. 6.

The European STOXX 600 stock index (.STOXX) fell 0.4% in early trading. Wall Street futures markets indicated that the S&P 500 stock index would drift 0.2% after falling 2% in the previous session.

A surprisingly upbeat batch of data in recent weeks has stalled a multi-asset rally that began last October, which was based on a scenario of the global economy cooling just enough to persuade hawkish central banks to halt rate hikes. .

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Wall Street posted its worst daily performance of the year on Tuesday, as investors reacted to a surprisingly strong reading of S&P Global’s composite PMI with concerns that robust business conditions would continue to fuel inflation.

“The market has been too optimistic,” said Luca Paolini, chief strategist at Pictet Asset Management.

“Economic data has been much more resilient than we all thought (it would be) and we have to accept that.”

The MSCI all-country stock index, which rebounded 7.1% in January, has fallen 2% so far this month, depressed by a US jobs report and rate fears, as even as economists have revised up their forecasts for economic growth in the United States and the United States. euro area this year.

The 10-year US Treasury yield, which moves inversely to its price, fell 2 basis points (bps) on Wednesday to 3.953%, after hitting its highest since November.

It was a reversal of a strong performance in Treasuries at the start of the year, when bonds rallied to reflect bets on lower inflation. The benchmark 10-year yield is up about 60 basis points from its January low.

Swap markets now expect the Fed, the world’s most influential central bank, to raise its key rate, currently set at 4.5%, to 4.75%.

New Zealand’s central bank on Wednesday raised interest rates by 50 basis points to a 14-year high of 4.75%, signaling further monetary tightening to come.

“It’s about the market that central banks will have to raise rates a lot more to rein in inflation,” said Kerry Craig, global markets strategist at JPMorgan Asset Management.

Geopolitical tensions also rattled markets on Wednesday, after Russia’s Vladimir Putin issued a warning to the West over Ukraine suspending its last major nuclear arms control treaty with the United States. US Secretary of State Antony Blinken said Putin’s decision was “deeply unfortunate and irresponsible”.

The dollar index was flat, but remained on track for a 2% gain so far in February, which would be its first monthly gain in five.

Brent, the global oil benchmark, fell 0.8% to around $82 a barrel.

Reporting by Naomi Rovnick; Additional reporting by Selena Li; Editing by Bradley Perrett and Kim Coghill

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