World stocks fall on interest rate fears, strong dollar and political turbulence

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A run of upbeat economic data suggests interest rates will have to rise further and stay higher for longer

The exterior signage of the London Stock Exchange building on August 9,2022 in London, England. Picture: GETTY IMAGES/PETER DAZELEY.

Government bonds, which usually perform well when there is a dash for safe havens, have come under intense pressure, sending 10-year Treasury yields towards one-month highs. Friday’s US data showed 517,000 jobs were created in January, well above expectations for 185,000, while revisions for 2022 figures led to nonfarm payrolls increasing by 586,000 for the year. Deutsche Bank strategist Jim Reid called the report “astonishing”.

The MSCI All-World share index was down 0.5% on the day, driven in part by a 0.7% fall in European blue-chips as the Stoxx 600 came under pressure.The drama over the balloon, which Beijing reiterated was a civilian airship that accidentally strayed into US airspace, has further strained already-tense relations and led Washington to cancel a planned visit to Beijing by Secretary of State Antony Blinken.

Deutsche Bank’s Reid said diplomatic tensions between the two countries would be worth watching this week. “We will see if there is any retaliation and/or how strong the rhetoric is.” “More importantly, the US payrolls published last Friday indicated that the Fed is likely to remain in a tightening mode for longer then the markets currently anticipate at a time when President Erdogan strongly indicated he expects the Turkish central bank to cut interest rates,” he said.A host of Fed officials are set to speak this week, led by Chair Jerome Powell on Tuesday, and the tone could be hawkish. European Central Bank and Bank of England policymakers will also be making appearances.

 

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