The Dow fell more than 300 points and bond yields climb amidst warnings on global economy.
U.S. stock indexes plummeted , the dollar soared and Treasury yields climbed to their highest level in over a decade on Friday after investors were hit by new signs of a global economic slowdown and Britain's plans for massive tax cuts via borrowing.
The S&P 500 index fell 1.4%, the DJIA fell 327 points, and the NASDAQ composite index fell 1.4%. The three major indexes have tumbled for the fourth day in a row.
Citigroup analyst Dirk Willer said in a note to clients Friday that the Fed's hawkish stance on countering soaring prices will only increase the risk of recession.
Treasury bond yields rose as investors prepared for more monetary tightening. The yield on the US10Y treasury note rose to 3.775% at one point yesterday, the highest closing level since February 2011.
According to business surveys, economic activity in Europe fell sharply in September, highlighting the impacts on growth of soaring inflation, the energy crisis and Russia Ukraine war outside the US.
S&P Global Inc. said Germany, Europe's largest economy, was the most affected by the natural gas crisis, with an exceptionally marked contraction in economic activities.
For the eurozone as a whole, the company's composite PMI fell to 48.2 in September, a 20-month low (reading below 50 indicating contraction). S&P Global Inc. reported data based on surveys of manufacturers and service providers showed that the economic downturn had intensified and may likely to accumulate further momentum in the coming months.
The pan-European Stoxx Europe 600 index dropped 2.5%, while the UK's FTSE 100 index fell 2.2%. Germany's DAX index fell 2.6%, putting Germany's benchmark stock index to close at its lowest mark since the end of 2020.
This week, a number of central banks including United States, Switzerland and South Africa, raised the interest rates. This has further undermined the investors hopes of a soft landing that efforts to curb soaring inflation will be a drag on economic growth.
Antoine Bouvet, ING senior interest rate strategist said: "all central banks are following the same tone: they are trying to control inflation anyway. The Fed has clearly set the tone that they will continue no matter what pain the economy suffers. "
European government bonds also suffered a sell-off, first in the UK, after new finance minister Kwasi Kwarteng, unleashed a massive tax cut that would need 72.4 billion pounds of new borrowing that caused British sterling and government bonds in free fall. The move is an attempt to jump-start Britain's sluggish economy through tax incentives and reform.
The USD index rose 0.7%, while the euro and sterling fell to decades lows. The yen fell 0.3% against the dollar after Japan directly intervened in the forex market to buy yen and sell dollars for the first time in 24 years.
In commodity markets, oil prices are under pressure with brent crude fell 3% to $86.81 a barrel. Investors worry that the slowdown of economy will be a drag on crude oil demand.
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