Risk-off sentiment returns with focus on inflation
BNN Bloomberg
Risk-off sentiment returned to markets on Thursday as concern about inflation and the risk of global recession overshadowed the Bank of England’s move to restore calm.
The pound snapped a two-day gain and UK gilt yields rose as Prime Minister Liz Truss defended a giant package of unfunded tax cuts that sent markets into turmoil. The dollar climbed versus all of its Group-of-10 peers and Treasuries slumped as investors focused on expectations the Federal Reserve will continue to deliver aggressive interest-rate hikes.
European bond yields also rose as investors digested the latest inflation data and commentary from European Central Bank officials, while Germany’s leading research institutes said the region’s biggest economy will likely contract by 0.4 per cent next year due to the impact of the energy crisis. Euro-area economic confidence dropped to the lowest since 2020.
Stocks and US futures fell, as Hong Kong’s Hang Seng Tech Index touched its lowest since inception. European stocks are extending a selloff that has caused valuations to drop to their lowest since 2012 and well below the average of the past decade.
