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Stocks eye steepest slide since 2020 as central bankers roil markets

By Reuters_News

09:28, 17 June 2022

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 10, 2022.
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 10, 2022.

By Simon Jessop

- World stocks headed for their worst week since markets' pandemic meltdown in March 2020 as leading central banks doubled down on tighter policy in an effort to tame inflation, setting investors on edge about future economic growth.

The biggest U.S. rate rise since 1994, the first such Swiss move in 15 years, a fifth rise in British rates since December and a move by the European Central Bank to bolster the indebted south ahead of future rises all took turns in roiling markets.

The Bank of Japan was the only outlier in a week where money prices rose around the world, sticking with its strategy of pinning 10-year yields near zero on Friday.

After a week of punchy moves across asset classes, world stocks .MIWD00000PUS were flat on Friday to take weekly losses to 5.5% and leave the index on course for the steepest weekly percentage drop in more than two years.

Overnight in Asia, the dollar climbed 1.8% against the yen to 134.55 in volatile trade, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell to a five-week low, dragged by selling in Australia. Japan's Nikkei .N225 fell 1.8% and headed for a weekly drop of almost 7%.

S&P 500 futures and Nasdaq 100 futures were both up 1.1%, but remain well underwater on the week. 

“The more aggressive line by central banks adds to headwinds for both economic growth and equities," Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said. "The risks of a recession are rising, while achieving a soft landing for the US economy appears increasingly challenging.”

Data from analysts at Bank of America showed more than 88% of the stock indexes it tracks are trading below their 50-day and 200-day moving average, leading markets "painfully oversold".

 

ONE WAY

Bonds and currencies were jittery after a rollercoaster week.

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U.S. labour and housing data came in soft on Thursday, on the heels of disappointing retail sales figures, with the worries knocking the dollar and helping Treasuries.

Benchmark U.S. 10-year Treasury yields fell nearly 10 basis points overnight but were last at 3.2162% during early European trade. Yields rise when prices fall. US/

Southern European bond yields dropped sharply on Friday, though, after reports of more detail from ECB President Christine Lagarde over its plans to develop a tool to support yields.

Germany's 10-year yield, the benchmark for the euro area, was last at 1.65% .

In recent sessions, the dollar pulled back from a 20-year high, but it has not fallen far and was last up 0.3%, on course to end the week steady against a basket of currencies .

Sterling rose 1.4% on Thursday after a 25-basis-point rate rise and was last down 0.2% as it heads for a steady week. Two-year gilts were last at 2.125%. GB/

"Despite today's apparent semblance of calm in the markets, investors will need to transition from a soft to a hard landing strategy meaning they will either have to turn to defensive or de-risk completely," Stephen Innes, managing partner at SPI Asset Management, said.

Growth fears took oil on a brief trip lower before prices steadied. Brent crude futures were last at $120.53 a barrel. Gold trimmed early gains to be down 0.3% at $1,848 an ounce and bitcoin climbed 3.3% to $21,051.

 

Additional reporting by Tom Westbrook; Editing by Lincoln Feast, Angus MacSwan and Andrew Heavens

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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