NEW YORK. Global stocks and oil prices fell on Friday, while safe havens such as the dollar and Treasuries rallied as investors battled a hawkish turnaround from major central banks in the fight against inflation and a growing number of Omicron cases.
Asian stocks closed near their lows in a year, while overall European stocks fell 0.5 percent. Meanwhile, Treasury yields hit their lowest level since early December.
“The central banks brought a hawk to the holidays. The remainder of 2021 will be spent focusing on the impact of Omicron and any associated constraints and / or delays in getting back to normal, ”said Jan Lyngen, head of US betting strategy at BMO Capital Markets.
According to MSCI estimates, stocks worldwide fell 0.78%.
At noon on Wall Street, the Dow Jones Industrial Average fell 475.71 points, or 1.33 percent, to 35,421.93, the S&P 500 lost 41.38 points, or 0.89 percent, to 4,627.29, and The Nasdaq Composite Index fell 41.14 points, or 0.27 percent, to 15,139.30. …
US equities reversed Wednesday’s gains as markets hailed the Federal Reserve’s commitment to tackling rising inflation with faster bond cuts and higher interest rates next year.
The hawkish bias of central banks this week, including the Fed and the Bank of England and to a lesser extent the European Central Bank, was initially greeted with a wave of buying from investors confident that policymakers would contain inflation.
But the sentiment has turned gloomier since then, as traders worry that markets pumped by cheap money are vulnerable to even the slightest pullback of stimulus.
“Volatility is on the rise again, making it less predictable for what might happen next,” said Ipek Ozkardeskaya, senior analyst at Swissquote.
On Friday, the Bank of Japan cut its emergency funding for the pandemic, but remained extremely soft and increased financial aid for small businesses, reinforcing expectations that it will remain one of the most peaceful central banks for the foreseeable future.
The benchmark 10-year bond last rose 13/32 to 1.38 percent from 1.422 percent late Thursday. The dollar index rose 0.424 percent.
Added to the caution are fears that rising Omicron infection rates mean a tough few months for the global economy, although most economists believe the damage will be much less severe than in previous waves of COVID-19 cases.
“Typically, following a more aggressive (FOMC) decision, yields should rise in anticipation of a Fed tightening cycle,” Westpac analysts say.
“However, at the moment, there is a competing dynamic: continuing fears about inflation, causing a tightening of the Fed’s rhetoric, are offset by fears that Omicron will undermine economic growth in the near future,” they added.
On Thursday, the Bank of England surprised markets by becoming the first G7 central bank to raise interest rates since the pandemic.
Oil prices fell: US crude fell 2.03 percent to $ 70.91 a barrel, while Brent crude fell to $ 73.47, down 2.07 percent on the day.
David Randall and Tommy Wilkes