Australian shares seesaw at open as investors worry that aggressive monetary policy tightening could pull the global economy into recession.
- ASX 200 suffered the worst week last week since COVID
- Dow Jones Industrial Average slipped 0.13 per cent, the S&P 500 added 0.22 per cent, and the Nasdaq Composite jumped 1.43 per cent
- The pan-European STOXX 600 index rose 0.1 per cent in volatile trade, but ended last week 4.6 per cent lower
ASX 200 was flat at 6,474 at 10.24am AEST.
At the same time, the Australian dollar was up at 69.49 US cents.
All 11 sectors were lower over the last week. Although little changed, the consumer staples sector was the best performing in early trade. It was down 3 per cent for the past five days.
Pointsbet (+11.2pc), Harvey Norman (+4.8pc) and Home Consortium (+3.6pc) were the top movers.
Meanwhile, Bega Cheese (-6.9pc), De Gray Mining (-6.1pc) and Beach Energy (-5.9pc) were the worst performers.
Brent crude oil was up, trading at $US113.77 a barrel, by 10:31am AEST.
Biggest weekly loss since 2020
World stocks on Friday closed out their steepest weekly slide since the pandemic meltdown of March 2020, as investors worried that tighter monetary policy by inflation-fighting central banks could damage economic growth.
The US Federal Reserve’s biggest rate hike 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 all took turns roiling markets.
The Bank of Japan was the only outlier in a week where money prices rose around the world, sticking on Friday with its strategy of pinning 10-year yields near zero.
After sharp early losses, world stocks steadied somewhat to end Friday’s session down by just 0.12 per cent.
The weekly slide of 5.8 per cent was the steepest since the week of March 20, 2020.
Wall Street’s Dow Jones Industrial Average slipped 0.13 per cent, the S&P 500 added 0.22 per cent, and the Nasdaq Composite jumped 1.43 per cent.
For the week, the S&P 500 dropped 5.8 per cent, also its biggest fall since the third week of 2020.
“Inflation, the war and lockdowns in China have derailed the global recovery,” economists at Bank of America said in a note to clients, adding they see a 40 per cent chance of a recession in the United States next year as the Fed keeps raising rates.
The Fed on Friday said its commitment to fight inflation is “unconditional”. Fears that its rate hikes could trigger a recession supported Treasury prices and slowed the rise in yields, which fall when prices rise.
Ten-year Treasury yields retreated to 3.22944 per cent after hitting an 11-year high of 3.498 per cent on Tuesday.
‘Global central bank policy momentum is all one way’
Southern European bond yields dropped sharply after reports of more detail from ECB President Christine Lagarde on the central bank’s plans.
“The more aggressive line by central banks adds to headwinds for both economic growth and equities,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell to a five-week low, dragged by selling in Australia.
Japan’s Nikkei fell 1.8 per cent and headed for a weekly drop of almost 7 per cent.
Bonds and currencies were jittery after a rollercoaster week.
The yen tanked after the Bank of Japan stuck to its ultra-accommodative policy stance.
The yen fell 2.2 per cent by late Friday, bolstering the US dollar, which rose 0.73 per cent against a basket of major currencies.
Sterling fell 1 per cent in New York as investors focused on the gap between US and UK rates.
The Bank of England is opting for a more moderate approach than the Fed.
“Markets may just be continuously adjusting to an outlook for higher global policy rates … as global central bank policy momentum is all one way.”
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