European shares slipped on Friday at the end of a tumultuous week for stocks and bond markets, after the US Federal Reserve set the stage for a flurry of interest rate rises by other global central banks.
The regional Stoxx 600 gauge lost 0.2 per cent in early dealings, while the UK’s FTSE 100 edged down 0.1 per cent. In Asia, Hong Kong’s Hang Seng lost 0.7 per cent. Japanese markets were closed for a public holiday.
Those moves left a FTSE gauge of global shares on track for a weekly decline of more than 3 per cent, after a particularly volatile few days of trading spurred by the Fed and its peers hoisting borrowing costs aggressively to curb inflation.
The US central bank on Wednesday lifted interest rates by 0.75 percentage points, marking the third consecutive increase of such magnitude and taking its target range to 3 to 3.25 per cent.
A day later, the Bank of England joined the tightening trend — jacking up rates by 0.5 percentage points to 2.25 per cent, while the Swiss National Bank took its lending rate into positive territory for the first time since 2015, at 0.5 per cent.
Concerns have intensified this year that the world’s most influential rate-setters will turn the screws on monetary policy to such an extent that they squash demand, compounding an economic slowdown.
Such fears have put government and corporate debt under increasing pressure, with the global fixed income market on track to close out its eighth week in a row of declines, according to an Ice Data Services index. The sell-off has taken worldwide borrowing costs to their highest level since June 2009 at nearly 3.8 per cent from about 1.3 per cent at the end of last year.
Debt market moves were steadier on Friday, with the 10-year US Treasury yield down 0.02 percentage points at 3.69 per cent. The benchmark instrument was still on track to close out the week yielding its highest since 2011. Germany’s equivalent Bund yield slipped 0.03 percentage points to 1.95 per cent, while the UK’s 10-year gilt yield fell by the same amount to 3.47 per cent.
Traders in London were poised to hear more details of the UK government’s plans to revive the economy with a bold programme of tax cuts. New chancellor Kwasi Kwarteng was due to deliver his first fiscal statement to parliament at 9.30am UK time which will include a 30-point growth package in an attempt to deliver shock treatment to Britain’s stagnating economy.
The dollar rose 0.4 per cent against a basket of six other currencies to hit a fresh 20-year high. The pound lost 0.6 per cent against the greenback to a new 37-year low of $1.119, while the euro slipped 0.4 per cent to remain below parity with the US currency at $0.979.