Premarket: World stocks head back towards 2-year lows as mood sours

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Rising interest rates, an escalation in the Ukraine war and increased efforts in China to curb COVID-19 cases all weigh on sentiment

World stocks headed back towards their lowest levels in almost two years on Tuesday, with sentiment weighed down by unease about rapidly rising interest rates, an escalation in the Ukraine war and China stepping up pandemic measures.

“We are heading toward a serious economic downturn and central banks are tightening policy, which is a bad combination for markets,” said Berenberg chief economist Holger Schmieding.”When do markets start to look beyond this? The next two months could be still rough.” Citing a “material risk” to financial stability, the BoE said it would buy up to 5 billion pounds of index-linked debt per day from Tuesday until the end of the week.

The backdrop of the bond market rout is ever higher interest rates. Nerves are fraying ahead of Thursday’s release of U.S. inflation data which could set the stage for another big hike from the Federal Reserve in November. That outlook is giving dollar bulls another run and has the greenback drifting toward the milestone highs it scaled last month.

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