Shock Swiss rate hike puts markets on edge; The BOJ holds

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Pedestrians are reflected in a window in front of a chart displaying share prices at the Australian Securities Exchange (ASX) in Sydney, Australia, February 9, 2018. REUTERS/David Gray/File Photo

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  • The SNB raises 50 basis points, the franc soars, the dollar slips
  • Stock markets tumble as further interest rate hikes loom
  • Yen slides as BOJ leaves policy unchanged

SINGAPORE, June 17 (Reuters) – Global stocks headed for their worst week since markets collapsed in March 2020 on Friday as investors worried about growth in the face of global rate hikes – except in Japan where political parameters remained easy and the yen fell.

The Bank of Japan stuck to its strategy of setting 10-year yields near zero at its policy meeting, in stark contrast to the rest of the world. Even the Swiss National Bank shocked investors overnight with its first rate hike in 15 years. Read more

The yen was last down 1% at 133.75 to the dollar in volatile trading after the BOJ decision. That was little balm for broader markets, which fear inflation and rate hikes could stifle economic growth for years.

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MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell to a five-week low, led by selling in Australia where the ASX 200 (.AXJO) fell 2%. The Japanese Nikkei (.N225) fell 2.4%.

U.S. futures stabilized, with S&P 500 futures up 0.4% and Nasdaq 100 futures up 0.6%, but suffered heavy losses. Overnight, the Nasdaq (.IXIC) fell 4% and the S&P 500 (.SPX) 3.3%.

“We are entering a difficult phase of regime change, as risks to economic growth add to the already hot inflationary backdrop,” said Vincent Mortier, chief investment officer at Europe’s largest fund manager, Amundi.

“The current revaluation removes most of the overvaluation from the market, but current levels are vulnerable to any deterioration in company fundamentals.”

Global stocks (.MIWD00000PUS) are down 5.7% for the week so far, on track for the biggest weekly percentage decline in more than two years.

ONE WAY

Bonds and currencies had a crazy Thursday.

In addition to the Swiss rise, the Bank of England announced a 25 basis point rate hike, which was lower than expected, but prompted gilts to sell and the pound to rise by betting that futures increases would come quickly. Read more

“If a central bank doesn’t act aggressively, yields and the price of risk will translate more into rate hikes,” said NatWest Markets strategist John Briggs.

“Markets may simply permanently adjust to a prospect of higher global policy rates…because the policy momentum of global central banks is one-sided.”

The pound rose 1.4% on Thursday and maintained its gains through Friday as it heads into a flat week. Two-year gilts rose 18 basis points to 2.143%.

German debt was also dumped after the Swiss surprise and a plan by the European Central Bank to steer its bond purchases towards peripheral countries, before fears for growth reduced expectations a little. things.

Two-year German Bund yields ended the session up 8.5 basis points at 1.152% and the 10-year Bund yield rose 5 basis points at 1.703%.

U.S. jobs and housing data were weak on Thursday, on the heels of disappointing retail sales figures as concerns dragged down the dollar and helped Treasuries. Read more

Benchmark 10-year Treasury yields fell nearly 10 basis points overnight, but climbed to 3.2253% during the Asian morning. Yields rise when prices fall.

Another factor that weighed on the dollar was the surge in the Swiss franc, as it is used as a funding currency and often traded for dollars before they are traded for high yields – meaning that dollars are sold when this trade reverses.

Growth fears dragged oil into a brief overnight decline before prices stabilized. Brent futures were last at $118.87 a barrel. Gold was held at $1,844 an ounce and bitcoin was kept under pressure at $20,600.

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Reporting by Tom Westbrook; Edition by Lincoln Feast.

Our standards: The Thomson Reuters Trust Principles.

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