How Did World Stock Reach 2-Year Low?

On Thursday, investors braced for crucial U.S. inflation data that would later likely determine the magnitude of the Federal Reserve’s next interest rate rise. World equities fell to a nearly two-year low, and the Japanese yen was at 1998 levels.

Weak stocks sent MSCI’s 47-country world index down for a seventh consecutive day, continuing the recent negative days for global markets. There was no indication of relief in either Asia or Europe (EU). Bond traders were also keeping an eye on the British gilt market because the Bank of England should discontinue its emergency stabilization measures on Friday. The unstoppable dollar kept its footing in the currency markets to solidify the yen’s troubles.

Here Is What Changed This Week

The STOXX 600 index for all of Europe was down 0.6%, falling for a seventh straight session. Markets are concerned that rapid increases in global interest rates may lead to recessions, which is why it has dropped roughly 4.3% in the previous six days. German harmonized inflation was 10.9% y/y in September by statistics, but all eyes are on U.S. CPI data that will come at 12:30 GMT.

According to Paul O’Connor, Head of Multi-Asset at Janus Henderson, Investors are wondering whether central banks like the Fed are nearing the end of their interest rate rises and whether we are already there. Although he believes there will likely be many more downgrades to the growth story, he thinks we are fairly near pricing in peak rates.

According to the minutes of the Fed’s most recent policy meeting, which was published on Wednesday, increases in interest rates take one to eighteen months to take effect completely. Therefore, it is highly likely that the central banks will proclaim a halt around the end of the year. In Europe, Treasury rates were gradually rising. The benchmark 10-year yield in the United States increased by two basis points to 3.923%, even though most comparable rates in Europe were somewhat lower.