Shares drop as 'higher-for-longer' rate outlook rattles investors
By Amanda Cooper
LONDON (Reuters) -Global shares fell on Monday, extending last week’s slide as central banks reinforced the message that interest rates would stay higher for longer, while investors braced for high-stakes U.S. inflation data on Friday.
Last week brought a mixed bag for investors.
On the one hand, the likes of the European Central Bank and the Bank of England signalled they might not raise rates again. On the other, the Federal Reserve kept rates unchanged, but Chair Jerome Powell made it very clear the soft landing that many investors are banking on was not his base-case scenario.
The MSCI All-World index, which is heading for its worst monthly performance this year, with a 3.6% drop, was down 0.2% on the day.
U.S. 10-year Treasury yields have nudged at 4.5% for the first time since October 2007, and on Monday were up 5 basis points at 4.491%, set for their largest monthly rise in a year, reflecting investor unease over the economic outlook.
«It’s not about the fact that the 10-year is over 4.5% — whatever the number is, you get this feeling in the market the pain threshold is getting closer. That is the story,» said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.
So far, investors have been pleasantly surprised by how well equity-market performance and valuations have held up, Ducrozet said, particularly in the tech sector, and how much resilience the U.S. economy has displayed in the face of almost two years of rate rises.
But cracks are starting to appear, just as the oil price is edging towards $100 a barrel and stocks beyond the tech sector are struggling to make much upward headway, he added.
«This is all happening at a moment where this resilience is coming to an
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