Wall Street continues to sell as global assets fail to rally

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  • US and global stock indices worsen bear market
  • Government bond yields climb again
  • The Dollar Holds Huge Gains; sterling cannot recover
  • Oil rebounds from Monday’s nine-month lows

Sep 27 (Reuters) – U.S. stocks gave up early gains to plunge deeper into a bear market on Tuesday, while the pound sterling showed little movement a day after hitting a record low as investors remained nervous over a possible global recession.

The pound was little changed at $1.071 after sterling tumbled to $1.0327 on Monday on concerns over funding for recently announced UK tax cuts, which follow huge subsidies to energy.

The Bank of England said Monday night that it would not hesitate to change interest rates and was watching the markets “very closely”. BoE chief economist Huw Pill added on Tuesday that the central bank was likely to provide a “meaningful policy response” to last week’s announcement, but would have to wait until its next meeting in November before to act.

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The five-year gilt yield rose around 0.1% to around 4.6%, maintaining its Monday peak of just over 4%.

U.S. stocks mostly faltered after an early morning rebound, with the S&P 500 hitting a two-year intraday low. The Dow Jones Industrial Average (.DJI) fell 0.42%, the S&P 500 (.SPX) lost 0.20% and the Nasdaq Composite (.IXIC) added only 0.25%

The benchmark S&P index fell more than 20% from its high in early January to its low on June 16, confirming a bear market. The index then recovered in mid-August before running out of steam.

“We don’t see a quick pullback or a return to 2% inflation, which would keep the Fed in bullish mode. This implies more volatility and a need for caution and balance in equity allocations,” said Tony DeSpirito, BlackRock’s chief investment officer for US Fundamental. Actions, wrote in a note released Tuesday.

Markets see a 65% chance of an additional 75 basis point move at the next US Federal Reserve meeting in November.

The Fed needs to raise interest rates by at least another percentage point this year, Chicago Fed President Charles Evans said Tuesday, a more aggressive stance than he had previously taken that underscores the central bank determination to stifle excessive inflation.

“Central bankers have walked a tightrope trying to rein in inflation while trying to limit recession risks,” Bank of America strategists wrote in a note released Tuesday.

“However, their recent tone and the ‘giant’ rate hikes have reinforced that the main priority is to control inflation, even at the potential cost of a recession.”

GLOBAL CONTAGION

The fallout from Britain kept other assets on edge.

The MSCI Global Equity Index (.MIWD00000PUS) reversed its first gains on Tuesday, falling about 0.3% to hit a nearly two-year low early Tuesday afternoon. European stocks (.STOXX) slipped 0.13%.

MSCI’s broadest index of Asian stocks outside of Japan (.MIAPJ0000PUS) hit a new two-year low and was flat on the day. The Japanese Nikkei (.N225) gained around 0.5%.

The bond sell-off in Japan pushed yields to the Bank of Japan ceiling and prompted more surprise buying from the central bank, while eurozone government bond yields rose. reached new multi-year highs on Tuesday.

Benchmark 10-year US Treasury yields also hit their highest level in more than 12 years as investors braced for higher interest rates.

The dollar maintained gains on Tuesday in its relentless rally while the pound, euro and Japanese yen regained little ground from multi-year lows after unusually volatile trading in recent sessions.

There was good news. New orders for US-made capital goods rose more than expected in August, suggesting businesses remain keen to invest in equipment, and a survey showed consumer confidence rose for a second consecutive month in September.

Oil rallied after plunging to a nine-month low in the previous session, helped by US Gulf of Mexico supply restrictions ahead of Hurricane Ian and a slightly stronger dollar. weak.

Brent crude settled up 2.6% to $86.27 a barrel, and US crude ended at $78.50, up 2.3%.

Dutch and British gas prices soared after the Nord Stream gas pipeline linking Russia to Europe suffered damage, raising concerns about the safety of the bloc’s energy infrastructure and triggering a sabotage investigation.

Gold, which hit a 2.5-year low on Monday, rose about 0.3% to $1,626 an ounce.

Bitcoin briefly topped $20,000 for the first time in about a week as cryptocurrencies rebounded.

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Reporting by Lawrence Delevingne in Boston and Carolyn Cohn in London; Additional reporting by Xie Yu in Hong Kong; edited by Jonathan Oatis, Richard Chang and Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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