Europe’s regional Stoxx 600 fell 2.1 cents, a drop that extended the gauge’s losses from its high for the year in early January to more than 20%, meeting the definition of a “bear market” technique. London’s FTSE 100 extended its initial slide to move 1.9% lower after Westminster’s mini-budget on Friday, which included details of bold cuts to corporate and personal tax rates as part of a growth package aimed at in boosting growth in Britain’s stagnant economy. UK government bond yields soared to record highs across all maturities amid concerns over the cost of the government’s borrowing plans, which will be largely financed by the sale of portfolios. The yield on 10-year gold jumped 0.29 percentage points to 3.78%, extending its gain for the week to more than 0.6 percentage points – one of the biggest gains on record. The policy-sensitive two-year yield rose 0.44 percentage points to 3.95%. Bond yields rise as bond prices fall. The five-year yield rose 0.54 percentage points, according to Refinitiv data, to 4.1%. The pound fell as much as 2.1 percent against the dollar to a new 37-year low of $1.1022. The dollar rose 0.8% against a basket of six bonds to hit a new 20-year high. Acute stress in UK financial markets weighed on global asset prices as fears intensified over how major central banks will continue to tighten the screws on monetary policy while trying to boost economic growth. Futures tracking Wall Street’s S&P 500 index fell 1.2 percent. Those tracking the Nasdaq 100 lost 1.3%. US government debt was also hit, with the yield on the two-year note adding 0.09 percentage points to 4.22%. The Federal Reserve on Wednesday set the stage for a flurry of rate hikes by other central banks this week, raising borrowing costs by 0.75 percentage points for the third time in a row and raising its target range to 3 to 3 .25%. A day later, the Bank of England joined the tightening trend — raising interest rates by 0.5 percentage points to 2.25%, while the Swiss National Bank took its lending rate into positive territory for the first time since 2015, at 0.5%. Rising US interest rates and the looming threat of a recession in the world’s largest economy prompted Goldman Sachs to cut its year-end forecast for the S&P 500 to 3,600. That would mean a drop of just under 25 percent for the U.S. stock market for all of 2022. David Kostin, an equity analyst at Goldman, said the majority of the bank’s clients had taken the view that a “hard landing” was inevitable for the US economy and that investors’ focus was on the timing, size and duration of a possible recession. A hard landing for the U.S. economy could drag the S&P 500 to 3,400 by the end of the year and 3,150 by the end of the first quarter, Kostin said. Citi’s asset allocation team said the Fed had “only promised a recession in the US” and investors shouldn’t pin their hopes on a “Santa” rally for the stock market at the end of the year.
