# Stocks sink on fears for global economy, capping worst H1 on record
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-06-30
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Stocks Sink as Central Banks Fight Inflation
Meta Description: Stay updated on the latest stock market news with global share prices sinking due to central bank actions. Find out more now.
URL: https://financedigest.com/stocks-sink-on-fears-for-global-economy-capping-worst-h1-on-recordhtml

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By Tommy Wilkes

LONDON (Reuters) – Stocks sank on Thursday to extend what is the worst first half of a year for global share prices on record, as investors fret that the latest show of central bank determination to tame inflation will slow economies rapidly.

Central bank chiefs from the U.S. Federal Reserve, the European Central [Bank and the Bank of England met in Portugal this week and voiced their renewed commitment to control inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") no matter what pain it caused.

While there was little new in the messaging, it was another warning that the era of cheap cash which had turbocharged share [prices for years](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll") is coming to an end.

Traders are now focused on data on U.S. core [prices due at 1230 GMT that are expected to underline the extent of the inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") challenge.

The MSCI World Equity Index was last down 0.67%, with its year-to-date losses down more than 20% — the [worst fall since](https://www.financedigest.com/worst-flooding-since-1998-leaves-33bn-economic-toll-in-china-according-to-aon-catastrophe-report.html "Worst flooding since 1998 leaves bn economic toll in China, according to Aon catastrophe report") the index’s creation. The [falls have wiped $13 trillion off stock](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") values.

On Thursday, the Euro STOXX extended earlier [falls in the European mid-session to drop](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") 2.15%, while the German DAX weakened 2.45%. Britain’s FTSE 100 was off 1.98%.

U.S. futures fell sharply, with little sign yet that the new quarter will bring in brave [bargain hunters](https://www.financedigest.com/post-brexit-bargains-draw-property-hunters-to-the-spanish-sunshine.html "POST-BREXIT BARGAINS DRAW PROPERTY HUNTERS TO THE SPANISH SUNSHINE"). This year’s dramatic [slide in asset prices has been led by tech-heavy indexes and stocks](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides") more sensitive to rising interest rates.

The S&P 500 has lost 20%, its worst first-half of a year [since 1970, and its worst performance during two quarters since the 2008 financial crisis](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis").

Fed Chair (Jerome) Powell and the FOMC (Federal [Open Market](https://www.financedigest.com/italy-open-to-selling-down-mps-stake-on-market-if-terms-buyers-are-right-sources.html "Italy open to selling down MPS stake on market if terms, buyers are right – sources") Committee) don’t want to get this one wrong. They want to be 90% sure that inflation is on the way down, not evenly balanced,” said Steve Englander, Standard Chartered’s [head of global](https://www.financedigest.com/new-york-catches-up-with-london-to-head-citys-global-centres-survey.html "New York catches up with London to head City’s global centres survey") G10 FX research.

So the signals they send become increasingly hawkish when they see the market as possibly prematurely [pricing in victory over inflation.”](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC")

(Graphics: https://fingfx.thomsonreuters.com/gfx/mkt/xmpjowyqwvr/Pasted%20image%201656492611136.png)

Sweden’s Riksbank became the latest to jack up borrowing costs, [pushing its key rate to 0.75% from 0.25% as expected](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") and flagging further sharp tightening to try and control price growth.

The Hungarian central [bank also hiked](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade"), raising rates by 0.5% to 7.75%.

MSCI’s broadest index of Asia-Pacific [shares outside Japan eased](https://www.financedigest.com/asia-shares-ease-euro-slugged-by-energy-crisis.html "Asia shares ease, euro slugged by energy crisis") 1.25%.

Japan’s Nikkei fell 1.54%, though its drop this quarter has been a relatively modest 5% thanks to a weak [yen and the Bank of Japan’s dogged commitment to super-easy policies](https://www.financedigest.com/yen-retreats-after-boj-policy-tweak-sparked-surge.html "Yen retreats after BOJ policy tweak sparked surge").

Chinese blue chips added 1.44%, helped by a survey showing a marked pick up in [services activity](https://www.financedigest.com/russian-services-activity-shrinks-for-third-month-running-in-dec-pmi.html "Russian services activity shrinks for third month running in Dec -PMI").

With investors so [fearful of a sharp global economic slowdown caused by central banks](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") tightening policy, some analysts are willing to call for a second-half rebound.

It is not that we think that the world and economies are in great shape, but just that an average [investor expects](https://www.financedigest.com/wave-of-lawsuits-over-ftx-expected-but-investors-will-face-legal-hurdles.html "‘Wave’ of lawsuits over FTX expected, but investors will face legal hurdles") an economic disaster, and if that does not materialize risky asset classes could recover most of their losses from the first half,” JPMorgan wrote in a research note.

DOLLAR REIGNS SUPREME

The [risk of recession](https://www.financedigest.com/high-inflation-recession-risk-widen-ecb-dilemma.html "High inflation, recession risk widen ECB dilemma") has been enough to bring U.S. 10-year [yields back to 3.06% from their recent](https://www.financedigest.com/german-yields-steady-spreads-tighten-after-recent-repricing.html "German yields steady, spreads tighten after recent repricing") peak at 3.498%, though that is still up 73 basis points for the quarter and nearly 160 bps for the year.

The [Fed’s hawkishness](https://www.financedigest.com/stocks-sag-as-hawkish-fed-cools-china-rally-awaits-us-jobs-data.html "Stocks sag as hawkish Fed cools China rally; awaits US jobs data") and an investor desire for liquidity in difficult times has gifted the U.S. [dollar its best quarter since](https://www.financedigest.com/dollar-heads-for-first-weekly-gain-since-february.html "Dollar heads for first weekly gain since February") late 2016. The dollar index on Thursday rose 0.3% to 105.34, putting it a whisker off its recent two-decade peak of 105.79.

The [Swedish crown](https://www.financedigest.com/dollar-edges-down-from-six-week-peak-swedish-crown-jumps.html "Dollar edges down from six-week peak, Swedish crown jumps") fell, with the Riksbank rate hike priced in — the euro was last up 0.3% at 10.719 crowns.

Sterling showed little reaction to data showing the UK balance of payments deficit [hit a record](https://www.financedigest.com/u-s-oil-exports-to-europe-hit-record-in-march-on-steep-discounts.html "U.S. oil exports to Europe hit record in March on steep discounts") 8.3% of GDP. The statistics office cautioned that the data was subject to more uncertainty than usual.

The [euro weakened](https://www.financedigest.com/rouble-weakens-sharply-from-over-2-year-high-vs-euro-before-long-weekend.html "Rouble weakens sharply from over 2-year high vs euro before long weekend") 0.3% to $1.0407, having shed 6% for the quarter and 8.4% for the year. It dropped to a new 7-1/2-year low versus 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 0.9963 francs.

The Japanese yen is in even worse shape, with the [dollar having gained](https://www.financedigest.com/stocks-dollar-gain-on-resilient-u-s-economy.html "Stocks, dollar gain on resilient U.S. economy") more than 12% this quarter and 18% this year to 137, its highest since 1998.

Oil prices, which have soared in 2022 along with most commodity prices, [edged lower](https://www.financedigest.com/sterling-edges-lower-ahead-of-key-data.html "Sterling edges lower ahead of key data") on Thursday amid concerns about an unseasonable slowdown in U.S. gasoline demand. \[O/R\]

OPEC and OPEC+ [end two days](https://www.financedigest.com/amazon-to-lay-off-staff-in-u-s-canada-and-costa-rica-by-end-of-day.html "Amazon to lay off staff in U.S., Canada and Costa Rica by end of day") of meetings on Thursday with little expectation they will be able to pump much more oil despite U.S. pressure to expand quotas.

Brent slipped 0.5% to $115.63 a barrel, while U.S. crude declined 0.46% to $109.29.

Bitcoin slipped 5%, and was briefly below $19,000.

(Additional reporting by Wayne Cole in Sydney; Editing by Gareth Jones)


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