US stocks were on course for their longest streak of quarterly losses since the 2008 financial crisis, as central banks’ determination to tame inflation through tighter monetary policy weighed on share prices.
Equities advanced in European morning dealings on Friday, consolidating after a tumultuous week in which the Bank of England intervened to calm turbulence in the UK government debt market.
London’s FTSE 100 gained 0.7 per cent, while the regional Stoxx Europe 600 rose 1.1 per cent. Futures tipped Wall Street’s broad S&P 500 to gain 0.9 per cent.
But that bounce failed to reverse a grim period for stock markets as central banks signalled they would stay the course on raising interest rates, reducing support for their economies in a bid to contain inflation.
“Central bankers are telling us that they are going to tame inflation, that is going to come at expense of the economy, and we don’t care about markets right now,” said Emmanuel Cau, head of European equity strategy at Barclays. “I suspect you can see the market bounce on the end of the month on the lack of back news.”
Bonds steadied on Friday in the wake of the BoE earlier this week launching a new programme to buy long-dated debt to stabilise the gilt market, which had been unnerved by the UK government’s plans to borrow more to fund tax cuts.
The yield on the 10-year US Treasury note, the global benchmark for borrowing, stood at about 3.72 per cent after breaking above 4 per cent on Wednesday for the first time since 2010. Yields rise as their prices fall.
UK bonds rallied slightly, with the 10-year yield ticking down 0.11 percentage points to 4.03 per cent.
Cau said central bankers have been at pains to tell the market that the BoE’s action should not have been viewed as the beginning of a broader return to supportive policy. “The [Federal Reserve] has been very clear that what the BoE is doing should be seen as isolated, and the Fed is going to stick to its plan. The [European Central Bank] is doing the same,” he said.
Wall Street suffered a grim session on Thursday, with the S&P 500 down 2.1 per cent. The tech-heavy Nasdaq Composite tumbled 2.8 per cent after Bank of America cut its rating for tech giant Apple from “buy” to “neutral”.
The downgrade, which cited expectations of weaker consumer demand for the iPhone maker’s flagship product, sparked a 4.9 per cent fall for Apple’s stock.
Asia-Pacific shares followed Wall Street tech stocks lower. Japan’s Topix index fell 1.8 per cent on Friday. China’s CSI 300 index of Shanghai- and Shenzhen-listed shares shed 0.6 per cent but Hong Kong’s Hang Seng added 0.3 per cent.
Additional reporting by Hudson Lockett in Hong Kong
Source: Financial Times