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Stocks slide again as concerns resume
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Dollar pushes back towards 20-year high
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Pressure back on UK bonds, pound after brief BoE respite
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China says stabilising currency top priority
By Marc Jones
LONDON, Sept 29 (Reuters) - Investors pedalled into
another cycle of selling on Thursday as the dollar tightened its
hold on the currency markets, recession fears sapped stocks and
bonds suffered more interest rate pain.
Europe's open was brutal. The STOXX 600 share index
dropped nearly 2% from the open, while both the euro and
the pound, hammered over the last week by UK debt
concerns, slumped 1%.
Government bond markets were braced for German data expected
to show consumer prices rising there at the fastest rate since
the 1950s. Gilt selling also resumed a day after the Bank of
England dramatically intervened in the UK market to try and
quell the storm around the government's spending plans.
"The market wouldn't mind some stability, it has become a
little bit unpredictable," said Barings Investment Institute's
Chief European strategist Agnes Belaisch.
She said investors were now seeing "incoherence" in the UK
with government spending as the BoE tries to rein in inflation,
while everywhere else the focus is on how high central banks are
prepared to go with interest rates.
Germany's 10-year government bond yield, the benchmark of
the euro zone, jumped to 2.27%, as pacey numbers
from the German state of North Rhine-Westphalia pointed to a
double-digit inflation figure for the country as a whole later.
The UK 10-year gilt yield, which drives UK borrowing costs,
rose 15 bps to 4.16% after falling almost 50 bps the day before
due the BoE's sudden intervention.
UK Prime Minister Liz Truss defended her new economic
programme that has sent sterling to a record low this week and
left the UK's borrowing costs close to Greece's - saying it was
designed to tackle the difficult situation Britain was now in.
BIT OF A MESS
Zooming back out, it was still about the dollar which has
crushed currencies virtually everywhere this year.
Speaking with reporters in London on Wednesday, veteran
Federal Reserve policymaker Charles Evans gave no indication
that any of the recent drama would blow the U.S. central bank
off its rate hike course.
"We just really need to get inflation in check," Evans said,
backing lifting the Fed's rates - now at 3%-3.25% - to a range
of 4.5%-4.75% by the end of the year or March.
Thursday's moves saw the U.S. dollar index, which
measures the currency against sterling, the euro and four other
peers, rise back towards its recent 20-year high again having
had its worst session in 2-1/2 years on Wednesday.
Overnight, China's yuan had fallen again although it stayed
just off recent post-financial crisis lows as China's central
bank said stabilising the foreign exchange market was its top
priority.
MSCI's broadest index of Asia-Pacific shares outside Japan
, ended the day virtually flat, although Japan's
Nikkei did manage a near 1% rise. S&P 500 futures
pointed to Wall Street falling more than 1.2% later with
more Fed policymakers also due to speak.
Oil prices were down again after gaining more than $3 in the
prior session, with the strong dollar capping oil demand and
concerns over the faltering global economic outlook clouding
market sentiment.
Brent crude futures fell 91 cents, or 1%, to $88.41
per barrel, while U.S. crude futures dropped by 80 cents,
or 1%, to $81.33 and gold fell 1% to $1,642 an ounce.
Goldman Sachs cut its 2023 oil price forecast this week,
citing expectations of weaker demand and a stronger U.S. dollar,
but said global supply issues reinforced its long-term view that
prices could rise again.
"It's all a bit of a mess," said ANZ economist Finn
Robinson.
($1 = 0.9252 pounds)
(Editing by Shri Navaratnam, Kim Coghill and Jane Merriman)
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