Global stock markets stumbled again on Friday and US Treasury yields climbed as cautious investors worried about how imminent US interest rate hikes would affect the economy.
A warning from the largest US bank JPMorgan Chase & Co. that its profitability may fall below a medium-term target cast another pall on Wall Street.
MSCI’s gauge of stocks across the globe had shed 0.36 percent. The pan-European STOXX 600 index closed down 1.01 percent and had its worst week since Nov. 26, weighed in part by declines in technology stocks.
In the US, a spate of bargain hunting toward the end of the day helped stocks to narrow losses. The Dow Jones Industrial Average fell 0.56 percent, the S&P 500 ended flat, and the Nasdaq Composite flipped into the black, rising 0.59 percent.
“We are now entering a period where the Federal Reserve will engage in a never-before-seen experiment: Raising interest rates off zero and reducing the size of its balance sheet in the same year,” said Nicholas Colas, co-founder of DataTrek Research.
“The market is still left wondering what results will come from their decisions,” Colas said.
In line with expectations of rising rates, benchmark 10-year Treasury yields jumped to 1.7859 percent, rebounding toward a two-year high of 1.808 percent struck earlier this week. Two-year Treasury yields hit a high of 0.973 percent, a level last seen in February last 2020.
European bond yields also rose in choppy trade as investors focused on monetary policy tightening by central banks, though sharp falls in Germany’s benchmark 10-year yield earlier this week led it to notch its biggest weekly fall in 10 weeks.
Meanwhile, in Asia, the five- year Japanese government bond yield jumped to its highest since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers are debating how soon they can start an eventual interest rate hike.
Such a move could come even before inflation hits the bank’s 2 percent target, sources said.
The dollar, which has been slugged by a three-day selling spree as investors bet that expec- tations of rate rises are already priced into the currency, finally steadied on Friday.
The dollar index, which measures the greenback against a basket of six currencies, bounced 0.34 percent to 95.167, pulling away further from a two-month low hit this week.
A bounce in the dollar dragged on the euro, which lost 0.34 percent to 1.14135.
Sterling also slipped 0.22 percent to 1.36780, taking a breather after this week’s rally that pushed it to a 2-1/2-month high.
GDP data on Friday showed that Britain’s economy grew faster than expected in November and its output finally surpassed its level before the country went into its first COVID-19 lockdown.