The second half begins with renewed pressure on stocks

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LONDON — The second half of the year began on Friday with greater volatility for global equities, as recessionary worries that have built up in recent weeks also led to a further sharp drop in metals, bond yields and some key currencies.

The MSCI index of global stocks had its worst first half since its inception in 1990, as the yo-yoing in and out of red by European stock markets and Wall Street futures pointed to more instability ahead.

Asia had also fallen overnight, with the biggest fall in Taiwan, where the growth-sensitive benchmark slipped more than 3% to its lowest level since late 2020.

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The Japanese Nikkei fell 1.75%. The Australian and New Zealand dollars each fell 1% to two-year lows.

Growth-sensitive copper fell 3.2% and is heading for its fourth consecutive weekly decline, while US Treasuries and German Bunds rallied in bond markets.

Natixis’ head of European macroeconomic research Dirk Schumacher said that while the region was not yet in recession, the concern was that it could be pushed into it.

Data on Friday showed manufacturing output in the euro zone fell for the first time last month since the first wave of the coronavirus pandemic in 2020, while inflation figures hit a new record high.

« In Europe and around the world, the cyclical picture is not very pretty, » Schumacher said.

“There is a long list of risk factors,” he added, and “the usual safety valve (lower interest rates or central bank stimulus) is obviously not the ».

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Across the Atlantic, S&P 500 futures were pointing half a percent lower after the U.S. benchmark closed its worst first half since 1970 on Thursday.

The Fed’s rapid interest rate hike means the Treasury market has been so battered that Deutsche Bank rated the halving’s performance as the worst since 1788 – the year the US Constitution was ratified .

However, signs of spike in inflation and signs of weak growth began to stabilize bond markets.

Two-year Treasuries are on track for their best week since the pandemic meltdown in markets in March 2020, as traders now cancel bets on rising rates.

Movements were jerky again on Friday. But the US two-year yield fell nearly 20 basis points (bps) this week to 2.85%. The 10-year yield is down about the same at 2.94% and Bund yields fell to 1.30% from a high of 1.66% on Tuesday.

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Fed funds futures, priced a few weeks ago at rates reaching 4% next year, now show markets expecting rate cuts by mid-2023 and at a peak below 3.5%.

« We remain cautious as we don’t believe the worst is behind us, » Close Brothers Asset Management CIO Robert Alster said, explaining that his firm is staying away from equities for now.

“It’s an unusual confluence of higher interest rates as growth slows. It’s not really something that many of us have seen in our investing experience.


The dollar was back in the spotlight on Friday, having posted its best quarter since 2016 as US yields rose. Its reputation means that economic uncertainty has supported it even as yields have fallen.

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« It’s a safe-haven demand, » said Khoon Goh, head of Asia research at ANZ Bank in Singapore.

Other safe-haven currencies such as the Japanese yen and the Swiss franc also attracted investors. The yen rose about 0.2% to 135.40 per dollar and a little further to 141.64 per euro.

But the Aussie dollar fell thanks to support at $0.6850 in Asia and was last down 1.7% at $0.6787. The kiwi slid 1.3% to 0.6165. The British pound also suffered a further decline of 1.2%.

A series of business surveys on Friday showed China emerging as an outlier as its economy slowly recovers from COVID-19 lockdowns. Factory activity rebounded strongly in June against slowdowns in Japan and South Korea and a contraction in Taiwan.

Markets are also bouncing back and although the top-notch Shanghai Composite and CSI300 fell slightly by around 0.3% on Friday, they are each expected to register five consecutive weeks of gains.

Hong Kong’s markets were closed for a holiday and the city focused on visiting Chinese President Xi Jinping.

The yuan slipped with the broader market to 6.7136 per dollar. Gold was weighed down by the strengthening dollar and US yields and flirted with $1,800 an ounce.

Bitcoin, which suffered its biggest quarterly decline on record in the three months to the end of June, fell 4% to $19,133 on Friday.

(Additional reporting by Tom Westbrook in Singapore; Editing by Alex Richardson, Kim Coghill and Sriraj Kalluvila)



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