Pool / Getty Images
World equities slipped again on Friday, after Federal Reserve Chairman Jerome Powell gave little indication that the world’s most powerful central bank was prepared to intervene in the recent sell-off of government bonds.
In the US, the futures contract for the S&P 500 stock index fell by 0.44%, while Dow Jones futures fell by 0.46%. The future for the technology Nasdaq 100 fell by 0.49% as investors reconsidered the value of very fast-growing businesses in the face of higher bonds.
Asian stocks fell sharply before comparing their losses, while European stocks fell about 1% in early trading. Elsewhere, oil prices rose nearly a 14-month high after the OPEC + producer group unexpectedly extended the decline in crude production.
Bond yields, which move in reverse to prices, rose in European trade after overnight. Yields on the major ten-year U.S. Treasury note fell 0.1 basis points to 1.549% after hitting 1.583%. It stood at 0.92% at the beginning of the year.
Yields on government bonds rise as investors expect stronger growth and inflation, and therefore demand higher returns on investments.
Yet the rise has hurt stock markets – which have risen as ultra-low returns have led investors to look for strong returns in the stock markets that now look less attractive.
The chairman of the Fed, Powell, indicated on Thursday that the central bank is happy to keep the policy as it is at present.
“I am concerned about disorderly conditions in markets, or through a continuing tightening of financial conditions,” he told the Wall Street Journal’s job conference. He said the Fed monitors a wide range of financial conditions, not just one indicator.
Investors believe Powell’s words that the Fed is good with yields rising further. It hit equities again, with the Nasdaq 100 closing 1.73% lower, turning negative for the year, and the S&P 500 1.34%. The Dow Jones, which holds more stocks that could benefit from strong economic growth and inflation, fell 1.11%.
China’s CSI 300 fell to 2% but closed 0.34% lower. The Japanese Nikkei 225 ended 0.23% lower.
The European Stoxx 600 index fell 0.86% in morning trading, while the British FTSE 100 fell 0.71%.
“The inflation problems and the continued exchange of growth stocks are starting to weigh on the stock markets,” said Richard Hunter, chief marketing officer of Interactive Investor.
“The perceived threat of higher interest rates earlier than expected washes through to the stocks that could be most clearly affected by the consequent slowdown in profits.”
Oil prices rose sharply overnight after the OPEC group of oil producers and its allies unexpectedly agreed to further limit supply.
Brent crude rose 1.95% to $ 68.03 a barrel, a level not seen since January 2020. WTI crude rose 1.75% to $ 64.95 a barrel.
Bitcoin slipped 6.5% to $ 46,940. Analysts said it had become the bigger concern of the market.
Investors will be focused on U.S. figures for February, which appear at 8:30 p.m. ET. According to analysts, wages probably increased by 182,000 jobs last month after climbing 49,000 in January, according to a Reuters poll.