The blue-chip S&P 500 fell 1.5 percent on Friday, bringing the loss in the quarter between June and September to 5.3 percent. The S&P has now fallen for three straight quarters, the longest since the protracted bear market that accompanied the global financial crisis. The technology-heavy Nasdaq Composite also fell 1.5% on Friday, hitting its worst closing level since July 2020 to end the quarter down 4.1%. The sell-off in US assets this week continued after the Bank of England intervened to calm the turmoil in the UK government debt market. It’s been a tough year for stocks as central banks, including the U.S. Federal Reserve, have signaled they will stay on course to raise interest rates, reduce support for economic growth, in an effort to contain inflation. Lael Brainard, vice chairman, on Friday morning reiterated that view, acknowledging that while the Fed was aware of market jitters, it remained committed to tighter monetary policy. Peter Tchir, chief macro strategist at Academy Securities, said investors are buying into the Fed’s commitment to reducing inflation, even if stocks take a hit in the process. “Today, I think the market realizes that the economy is potentially slowing down quickly, but that the Fed may not be doing anything to stop that. As volatility in gold and liquidity across markets in the US worsens, more investors are concerned about the possibility of a quick, big pullback in equity and bond prices,” said Tchir. Emmanuel Cau, head of European equity strategy at Barclays, said: “Central bankers are telling us they will tame inflation, that will come in [the] expenses of the economy and we are not interested in the markets at the moment.” U.S. Treasuries sold off on Friday but remained above lows hit earlier in the week. Prices fell last Friday and on Monday after the UK announced £45bn of unfunded tax cuts. UK and US bonds later steadied after the BoE intervened this week with a new long-term debt buying programme. The yield on the 10-year U.S. Treasury note, the global benchmark for borrowing, rose 0.03 percentage points to 3.81 percent after breaking above 4 percent on Wednesday for the first time since 2010. Yields rise as their prices fall. However, despite the rebound in government debt following the BoE’s intervention, the rapid tightening of monetary policy this year has both the two-year note, which is highly sensitive to policy expectations, and the 10-year, on track for the biggest annual sell-off the -offs in logging. On Friday, the yield on UK 10-year debt fell 0.05 percentage points to 4.08%. UK yields across all maturities have moved at historic highs in recent sessions, with the 10-year rising more than 0.4 percentage points on Monday before falling almost 0.5 percentage points on Wednesday. Cau said central bankers were at pains to tell the market that the BoE’s action should not be seen as the start of a broader return to accommodative policy. “THE [Federal Reserve] it was very clear that what the BoE is doing should be seen in isolation and the Fed will stick to its plan. The [European Central Bank] does the same,” he added. London’s FTSE 100 rose 0.2 percent on Friday, while Europe’s regional Stoxx 600 gained 1.3 percent. In Asian stock markets, Japan’s Topix index fell 1.8 percent on Friday. China’s CSI 300 index of shares listed in Shanghai and Shenzhen fell 0.6 percent, while Hong Kong’s Hang Seng rose 0.3 percent. Additional reporting by Hudson Lockett in Hong Kong
