© Reuters. A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying graphs (top) of Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon
By Carolyn Cohn and Stella Qiu
LONDON/BEIJING (Reuters) – World stocks hit a two-week low on Friday as rate hike guidance from the European Central Bank and jitters over upcoming U.S. inflation data stoked concerns about global growth, while verbal intervention from Japan boosted the yen
The ECB said on Thursday it would deliver its first interest rate rise since 2011 next month, followed by a potentially larger move in September.
Analysts at Deutsche and Morgan Stanley (NYSE:) lifted their euro zone rate hike forecasts on Friday.
Investors expect the Federal Reserve to raise interest rates by 50 basis points next week, especially if U.S. consumer price data on Friday confirms elevated inflation.
The consensus forecast sees a year-over-year inflation rate for May of 8.3%, unchanged from April.
“A lot of focus is on this current number, it’s not going to be a big move,” said Matthias Scheiber, global head of portfolio management for multi-asset solutions at Allspring.
“I don’t think it will derail what central banks currently have on their minds.”
However, rate rises may hit growth, Scheiber said, adding that he had turned slightly underweight on equities in recent weeks as a result of this concern.
MSCI’s world equity index fell 0.22% to its lowest since May 26, and was heading for a 2% fall for the week.
U.S. stock index futures ticked up 0.19% after the and Nasdaq fell more than 2% on Thursday in their biggest daily percentage declines since mid-May.
European stocks fell 1.1% to three-week lows.
It was the 17th week in a row of outflows for European equities in the week to Wednesday, according to BofA, with $2.1 billion leaving the space, as the sector has been hit hard by the Russia-Ukraine war.
100 fell 0.75% to 2-1/2 week lows.
The Bank of England said on Friday it was satisfied that Britain’s top banks could be shut down without putting at risk the stability of the financial system or disrupting customers, but it found shortcomings at Lloyds (LON:), Standard Chartered (OTC:) and HSBC.
Pressure is rising on other central banks to tighten, with the BoE and Sweden’s Riksbank expected to hike rates again next week.
“There’s currently a sense that inflation may be peaking, but that only applies to goods, and a better image is of rolling inflationary waves, as supply/demand pinch points shift,” said Kit Juckes, head of currency strategy at Societe Generale (OTC:).
The dollar fell 0.64% to 133.48 yen after Japan’s government and the central bank said in a statement they were “concerned” about recent sharp yen declines and stood ready to respond as needed on currency policy.
The yen has been ploughing 20-year lows against the dollar and seven-year troughs against the euro on expectations the Bank of Japan (BOJ) will continue to lag behind other major central banks in exiting stimulus policy.
The dollar eased 0.18% against a basket of major currencies, pulling away from its highest…