US stocks fell sharply at the start of trading on Monday with the opening of the S&P 500 benchmark in bearish territory as sell-off caused by high inflation and the prospect of a tightening Central Bank’s aggressive impact on global financial markets.
The Wall Street S&P 500 index fell 2.4%, pushing it more than 20% below its all-time high in January, a decline that is commonly identified as a bear market. The US stock meter had briefly entered a bear market in late May, before recovering from its lows.
The high-tech Nasdaq Composite fell 2.9%, bringing its year-on-year losses to about 30%. Speculative corners of the market have suffered a lot this year as US and European central banks begin to raise interest rates and drain liquidity from the financial system.
Bitcoin, the cryptocurrency that tends to react to the broadest market sentiment, traded below $ 24,000, after falling nearly 20 percent since Friday.
Analysts have improved their forecast on the extent to which the Federal Reserve will raise interest rates, and some speculate that the US central bank could implement an extra large increase of 0.75 percentage points at its policy meeting monetary policy this week.
US consumer price inflation hit an unexpectedly high annual rate of 8.6% in May, data showed on Friday as the Russian invasion of Ukraine raised fuel and food costs. Money markets are now priced at 3.4% of funds fed in December, moving from a range of 0.75% to the current 1%.
“I think with the latter [inflation] The Fed will do so and this will cause an economic slowdown, “said Julian Howard, chief investment officer for multi-asset solutions at GAM fund manager.” Everything looks pretty ugly in the short term and there’s nowhere to go. escape, apart from entering cash for the time being “.
The yield on the 10-year Treasury benchmark, which underpins overall borrowing costs, rose above 3.29 percent and reached its highest level since 2011 as the price of instrument will fall. The two-year Treasury yield, which follows interest rate expectations, rose 0.17 percentage points to 3.23 percent.
U.S. investment bank Goldman Sachs on Monday boosted its Fed policy forecast to include 0.5 percentage point increases this week and again in July, September and November, with more quarter-point increases in December and January.
“There is very little chance that the Fed will pivot to support the financial markets until there is a trend of very significant economic disappointments,” said Seema Shah, chief strategist at Principal Global Investors.
Barclays analysts forecast a 0.75 percentage point increase this week. Standard Chartered strategists said in a research note that they “would not prevent” this result.
In Europe, the Stoxx 600 stock index fell 2.1 percent, setting it on track for its fifth straight session of falls. The regional quota indicator has fallen more than 9 percent this quarter.
The 10-year Italian bond yield rose 0.19 percentage points to 3.94 percent, more than quadrupling since mid-December. This comes after the European Central Bank last week paved the way for its first rise in interest rates in more than a decade.
The pound fell 1.1 percent against the dollar to less than $ 1.22, depressed by the strengthening US currency and concerns about the UK economy.
Economists see the Bank of England raise its key debt rate by 0.25 percentage points on Thursday, with a rising probability of an increase of 0.5 percentage points, raising fears of stagnation.
Elsewhere, the yen hit a 24-year low of 135 135.19 per dollar as traders opted for the Bank of Japan to continue to challenge the global trend towards higher interest rates. An FTSE index of Asian stocks outside of Japan fell 2.8%.