Stocks Retreat Globally As Central Banks Turn Hawkish

Stocks fell at the end of the week as traders wrestled with this week's surprisingly hawkish turn from major central banks in the fight against inflation, and as rising Omicron cases spark worries about the hit to the global economy, Tommy Wilkes reported for Reuters.

Photo Insert: The London Stock Exchange

European stocks dropped, Asian shares closed near the year's lows and Wall Street looked set to open weaker after a bruising session the day before that was led by sharp falls in tech stocks.

The pan-European EUROSTOXX was down 0.65% by 1130 GMT. Germany's DAX dropped 0.81%, although Britain's FTSE 100 (.FTSE) bucked the trend with a 0.26% rise. Wall Street futures were in the red, with Nasdaq futures down 0.66%.

US stocks have now reversed all of their gains from Wednesday when markets welcomed the Federal Reserve's commitment to tackle rising inflation with faster bond tapering and interest rate rises next year.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.76% on Friday, only just holding above the year low set last week, while Chinese blue chips lost 1.59% and suffered their worst week in three months.

Stocks are going into the year-end period - when many traders are reluctant to put on new positions - near record highs but with plenty to worry about.

The hawkish tilt from central banks this week including the Federal Reserve and Bank of England, and to a lesser degree the European Central Bank (ECB), was initially greeted by a wave of buying from investors confident policymakers will curb higher inflation.

But the mood has since turned gloomier as traders fret markets pumped up on cheap money are vulnerable to even the smallest of pullbacks in stimulus. "Volatility is rising again, lowering the predictability of what may happen next," said Ipek Ozkardeskaya, Senior Analyst at Swissquote.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic