(Bloomberg) -- A selloff in the riskier corners of markets deepened as the UK’s plan to stimulate the economy fueled concerns about heightened inflation that could lead to tighter monetary policy, boosting the odds of a recession.
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It was a sea of red for equity trading desks around the world, with the rout in the S&P 500 pushing the gauge within a striking distance of its June bottom -- which stands 1.3% below current levels. The lack of full-blown capitulation may be a sign that the carnage isn’t over yet. Big firms like Goldman Sachs Group Inc. are slashing their targets for stocks, warning that a dramatic upward shift in the outlook for rates will weigh on valuations.
As the risk-off sentiment took hold, the dollar climbed to another record, sweeping aside other currencies. The euro slid to its weakest since 2002, while the pound touched its lowest in 37 years. Traders are focusing on the growing gap between interest rates in the US and elsewhere. Treasuries reversed a slide that earlier sent US 10-year yields above 3.8%.
Investors are flocking to cash and shunning almost every other asset class as they turn the most pessimistic since the global financial crisis, according to Bank of America Corp. Investor sentiment is “unquestionably” the worst it’s been since the crisis of 2008, with losses in government bonds being the highest since 1920, strategists led by Michael Hartnett wrote in a note.
“It appears that traders and investors are going to throw in the towel on this week in what feels like ‘the sky is falling’ type of event,” Kenny Polcari, chief strategist at SlateStone Wealth, wrote in a note. “Once everyone stops saying that they ‘think a recession is coming’ and accepts the fact that it is here already – then the psyche will change.”
Here are some of the main moves in markets:
Stocks
The S&P 500 fell 1.2% as of 9:31 a.m. New York time
The Nasdaq 100 fell 1%
The Dow Jones Industrial Average fell 1%
The Stoxx Europe 600 fell 1.7%
The MSCI World index fell 1.3%
Currencies
The Bloomberg Dollar Spot Index rose 0.7%
The euro fell 0.7% to $0.9768
The British pound fell 1.8% to $1.1056
The Japanese yen fell 0.3% to 142.82 per dollar
Bonds
The yield on 10-year Treasuries declined two basis points to 3.69%
Germany’s 10-year yield was little changed at 1.97%
Britain’s 10-year yield advanced 24 basis points to 3.73%
Commodities
West Texas Intermediate crude fell 5% to $79.31 a barrel
Gold futures fell 1.2% to $1,660.20 an ounce
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