SHARP DROP ON WALL STREET

US TREASURY yields rose and a gauge of global equity markets slumped yesterday, erasing much of the prior day’s relief rally, as investors worry central banks around the world need to aggressively tackle high inflation as growth slows.

A sharp decline on Wall Street snuffed a rally in European stocks as fears of a recession, as the Bank of England (BoE) suggested after it hiked rates, squashed enthusiasm from US Federal Reserve (Fed) chairperson Jerome Powell’s remarks on Wednesday. He said policymakers were not considering 75 basis-point moves in the future.

The yield on 10-year Treasury notes rose 16.9 basis points to 3.084 percent, while inflation-hedge gold bounced higher after Powell also emphasized risks to the economy from soaring inflation.

“It’s a very messy environment for investors right now,” said Anthony Saglimbene, global market strategist at Ameriprise Financial. “There’s an overall negative sentiment in the market.”

Markets would remain volatile until there was a clear picture on Fed rate policy and its trajectory later this year, he said.

Investors are “worried that when we get to the back half of this year, the Fed is going to be so aggressive with raising interest rates that they’re going to take the economy into a recession”.

MSCI’s gauge of stocks across the globe had shed 2.31 percent in afternoon trade and the pan-European Stoxx 600 index had lost 0.82 percent.

On Wall Street, the Dow Jones industrial average index was down 2.63 percent, the S&P 500 had dropped 3.09 percent and the Nasdaq Composite had lost 4.32 percent.

Britain’s pound and government bond yields fell sharply after the BoE raised rates to their highest since 2009 and warned the UK economy was at risk of recession.

US crude was last up 0.89 percent to $108.77 a barrel. I Reuters