# Stocks falter as economic worries nag, NZ delivers big rate hike
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-05
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Global stocks stumble as economic outlook weakens
Meta Description: Get the latest updates on the global stock market stumble as economic outlook weakens, central banks raise rates, and the dollar resurges.
URL: https://financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hikehtml

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By Dhara Ranasinghe

LONDON (Reuters) -World stocks stumbled on Wednesday as signs that the economic outlook is weakening spurred some caution, while the dollar edged back from two-month lows.

The Reserve Bank of New Zealand raised rates by 50 basis points to a 14-year high at 5.25%, a reminder that world central banks are not done with monetary tightening just yet.

[European stocks](https://www.financedigest.com/european-stocks-hit-six-week-high-on-hopes-for-rate-hike-slowdown.html "European stocks hit six-week high on hopes for rate hike slowdown") fell with the broad STOXX 600 index pulling away from Tuesday’s one-month highs. U.S. equity futures dipped and Japan’s Nikkei fell 1.6% in its [biggest one-day percentage fall since](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") mid-March.

MSCI’s world equity index pulled further away from Tuesday’s almost seven-week highs, while Asia trade was thinned by holidays in [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") and China.

Weak U.S. [economic data this week has exacerbated recession worries](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc"), taking the edge off recent stock market gains.

Data on Tuesday showed U.S. [job openings fell in February to the lowest level in almost two years and data](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") on Monday pointed to weakening U.S. manufacturing activity.

The euro zone [recovery picked up pace last month but the upturn was uneven across industries](https://www.financedigest.com/5-ways-the-fs-industry-can-support-the-recovery.html "5 ways the FS industry can support the recovery") and countries, a survey on Wednesday showed. U.S. March service sector activity [data is due out later](https://www.financedigest.com/10-steps-to-stop-lateral-movement-in-data-breaches.html "10 Steps to Stop Lateral Movement in Data Breaches").

Interest rate [futures have rallied strongly in recent weeks as traders bet that turmoil in the banking](https://www.financedigest.com/bank-of-the-future.html "Bank of the future") sector will tighten up on lending anyway and save the need for the Federal Reserve to do the job.

Markets pricing implies a better-than-even chance that the [Fed has finished raising rates](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") and more than 60 bps in cuts this year.

With the banking worries at least in the background for now focus is on the [economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") and central bank policy,” said Nordea chief analyst Jan von Gerich.

There is no fixed way of interpreting the [data in markets but it does seem that latest data was not seen as positive for equities by raising growth](https://www.financedigest.com/bridge-the-gaps-in-big-data-and-cross-into-a-world-of-growth.html "Bridge the gaps in Big Data – and cross into a world of growth") worries.

In a note, Pictet [Asset Management](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation") chief strategist Luca Paolini said that with focus turning from inflation to growth risks, Pictet had upgraded U.S. equities to neutral from underweight.

[DOLLAR RESPITE](https://www.financedigest.com/battered-sterling-gets-respite-but-set-for-weekly-fall-vs-dollar.html "Battered sterling gets respite but set for weekly fall vs dollar")

The dollar index edged up from two-month lows and the currency pulled back from its lowest levels since August 2021 against the [Swiss franc](https://www.financedigest.com/swiss-franc-grapples-with-safe-haven-identity-crisis-after-credit-suisse.html "Swiss franc grapples with safe-haven identity crisis after Credit Suisse") at around 0.9042.

The greenback, which has been hurt by the view that the Fed tightening cycle was drawing nearer, also clawed back some ground against the euro and sterling.

New Zealand’s currency, also known as the kiwi dollar, briefly jumped to its highest since mid-February after the country’s central bank [hiked rates](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") again.

But it was last down just a [touch at $0.6309 as the dollar bounced back](https://www.financedigest.com/putting-the-human-touch-back-into-banking-magazine.html "“Putting the human touch back into banking”-Magazine") broadly.

Outside the United States, markets see other central [banks staying the course on hikes to tame inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries"). A Reuters poll of FX strategists found most expect that to [keep pressure on the dollar](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control") this year.

Government [bond yields have been moving lower in recent weeks](https://www.financedigest.com/shares-and-bonds-nervy-as-rate-hike-week-looms.html "Shares and bonds nervy as rate-hike week looms"), reflecting expectations for weaker growth and a pause in monetary tightening. Two-year U.S. Treasury yields were last down around 2 bps at 3.82%, well below highs above 5% seen just before the collapse of [Silicon Valley Bank](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources") last month.

We’re not quite done with the tightening cycle, but we’re getting closer,” said Jim Cielinski, [global head](https://www.financedigest.com/liberty-appoints-new-european-global-financial-risks-head.html "Liberty Appoints New European Global Financial Risks Head") of fixed income, Janus Henderson.

In Europe, government [bond yields](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") were broadly steady after being whipped around sharply in recent weeks.

Gold, which pays no yield, [hit a fresh one-year](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") high above $2,000 an ounce. It was last up just 0.13% at $2,023 an ounce.

Commodity markets were settling down after Monday’s surge in [oil prices](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") on news of surprise OPEC+ production cuts.

Brent crude futures were [little changed](https://www.financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signals.html "Stocks, dollar little changed as inflation data sends mixed signals") at $84.95 a barrel. West Texas Intermediate U.S. [crude was also flat](https://www.financedigest.com/oil-near-flat-as-us-crude-stock-draw-contends-with-economic-concerns.html "Oil near flat as US crude stock draw contends with economic concerns"), trading at around $80.73 a barrel.\[O/R\]

(Reporting by Dhara Ranasinghe; Editing by Conor Humphries and Alison Williams)


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