Central bank meetings leave stocks lower and bonds stronger

The MSCI all country stock index was down 0.2%, adding to its 25% drop so far in 2022, wiping out the gains clocked up in 2021.

In Europe, the Stoxx index of 600 companies was down 0.5%, down almost 20% for the year so far, as downbeat earnings from chip equipment firm BE Semiconductor and telecom company Nokia fuelled fears of economic slowdown.

Eren Osman, MD of wealth management at Arbuthnot Latham, said earnings so far in the US and elsewhere have shown resilience as many companies beat expectations.

But earnings are likely to fall next year which, along with anticipated interest rate hikes in the US and elsewhere, are already largely priced into markets, Osman said.

“Once we start to see the ISM manufacturing data start to trough, the markets will get some confidence that we have seen the worst of it. A lot of people are waiting for that moment of capitulation and it might not happen,” Osman said.

On yen intervention watch

Asian shares fell on Thursday to their lowest since April 2020 as risk appetite among investors faded after inflation data across the globe reignited fears of aggressive interest rate hikes by the Fed.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell as much as 0.8%, leaving it down about 29% for the year.

China’s stock market fell while Hong Kong stocks hit levels last seen during the 2008-09 global financial crisis.

China on Thursday kept its benchmark lending rates unchanged for a second straight month as authorities held off unleashing more monetary stimulus to avoid stark policy divergence with other major economies.

Japanese finance minister Shunichi Suzuki vowed to take “appropriate steps” against excessive volatility in the yen.

“I think the risk of another intervention continues to be very high,” said Commonwealth Bank of Australia strategist Carol Kong. “It is a matter of time before they come into the market to support the yen.”