Global stocks were reported to be subdued on Monday, extending last week's price slide as the central bank reinforced its message that interest rates will remain high for longer, while investors braced for risky US inflation data on Friday.
Banks such as the European Central Bank and the Bank of England have signaled that they may not raise rates again. On the other hand, the Federal Reserve kept rates unchanged, but Chairman Jerome Powell made it clear that the soft landing that many investors believed was not the baseline scenario.
The MSCI All-World index, which was heading for its worst monthly performance of the year, with a 3.6% decline, slipped 0.2% on the day.
The 10-year US Treasury bond yield touched 4.5% for the first time since October 2007, and on Monday rose 5 basis points to 4.491%, on its way to its biggest monthly increase in a year. This reflects investors' uncertainty about economic prospects.
So far, investors have been pleased with the performance of equity markets and valuations that have held up well, particularly in the technology sector, and the extent to which the US economy has shown high resilience in the face of nearly two years of rate hikes, said Frederik Ducrozet, head of macroeconomic research at Pictet. Wealth Management
Waima once the market started to shake, factors such as oil prices approaching $100 per barrel and stocks outside the technology sector were difficult to climb higher, he continued.
"All this happened at the moment when this endurance ended. We already expect a big weakness to happen in the U.S. economy, it has happened in Europe and among them what Powell mentioned last week," he added.
An auto factory worker strike, a possible government shutdown, student loan payment extensions, higher energy prices, and higher long-term borrowing costs were among the risks Powell mentioned in a press conference last week.
S&P 500 and Nasdaq 100 stock futures were down 0.1%, reversing earlier gains.
