Wall Street keeps selling as world wealth fails to recover

  • US equities and global indexes drop negative, early gains
  • Dollar rises after touching 20-year high on Monday
  • Oil rises from Monday’s nine-month low

September 27 (Reuters) – US shares gave up early gains on Tuesday to plunge deeper into a bear market, while sterling held steady a day after hitting a record low as investors panicked over a potential global recession.

The pound was little changed at $1.067 after sterling collapsed on Monday due to concerns over the funding of recently announced UK tax cuts, which follow heavy energy subsidies.

The Bank of England said late Monday it would not hesitate to change interest rates and was monitoring the markets “very closely”. BofE’s chief economist Huw Pill said on Tuesday that BofE is likely to give “significant policy feedback” on last week’s announcement, but it should wait until its next meeting in November before making its move.

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Yields on the five-year gilts rose as much as 100 basis points in two trading days, but were down nearly 1% on Tuesday.

US stocks fell after early morning gains. The Dow Jones Industrial Average (.DJI), S&P 500 (.SPX) and Nasdaq Composite (.IXIC) all fell less than 1%.

The S&P benchmark index fell more than 20% from its early January highs to a June 16 low, confirming a bear market. The index gained momentum in mid-August before falling.

Tony DiSpirito, BlackRock’s chief investment officer for US Fundamentals, said, “With the Fed in hiking mode, we don’t see a quick layoff or a return to 2% inflation. That means more volatility and a need for caution and balance in equity allocation.” the wanted.” Equities wrote in a note issued on Tuesday.

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The next meeting of the US Federal Reserve in November sees a 70% chance for the market to rise further by 75 basis points.

The Fed needs to raise at least one more percentage point this year, Chicago Fed Chairman Charles Evans said on Tuesday, a more aggressive stance than he previously thought underscoring the central bank’s resolve to eliminate excessive inflation. Is.

Other central bank speakers scheduled for Tuesday include Fed Chair Jerome Powell and European Central Bank President Christine Lagarde.

“Central bankers are trying to curb inflation while attempting to limit recession risks,” Bank of America strategists wrote in a note released Tuesday.

“However, his recent tone and hike in ‘jumbo’ rates have reinforced that the most important priority is to contain inflation even at the potential cost of a recession.”

global infection

Britain’s spillover put other properties on the sidelines.

The MSCI World Equity Index (.MIWD00000PUS) reversed early gains on Tuesday, falling nearly 0.4% to a near two-year low on Tuesday afternoon. European shares (.STOXX) slid 0.1%.

MSCI’s broadest index of shares of Asia outside Japan (.MIAPJ0000PUS) hit a two-year low and was flat on the day. Japan’s Nikkei (.N225) rose nearly 0.5%.

Bond sales in Japan raised yields to the limit of the Bank of Japan and prompted more unscheduled purchases from the central bank. German 10-year bond yields rose to an 11-year high of around 2.142% before turning lower.

The benchmark US 10-year Treasury yield rose to its highest level in more than 12 years as investors prepared for higher interest rates.

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The dollar extended its relentless rally on Tuesday, with the euro and the Japanese yen gaining little ground from multi-year lows after unusually volatile trading in recent sessions.

Oil rose after falling to a nine-month low in the previous session, helped by supply restrictions in the US Gulf of Mexico before Hurricane Ian and a slightly softer dollar.

US crude was up 1.28% at $77.69 a barrel and Brent was up 1.56% at $85.37.

Dutch and British gas prices rose on news that the Nord Stream gas pipeline from Russia to Europe had been damaged, raising concerns over the safety of the bloc’s energy infrastructure and the prospect of a rapid resumption of flow through the pipeline. decreased.

Gold, which hit a 2-1/2-year low on Monday, rose 0.6% to $1,631.5 an ounce.

Bitcoin broke above $20,000 for the first time in nearly a week as the cryptocurrency surged alongside other risk-sensitive assets.

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Reporting by Lawrence Delevingne in Boston and Carolyn Cohn in London; Additional reporting by Zi Yu in Hong Kong; Editing by Jonathan Otis and Richard Chang

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