UK tax cuts deepen sell-off, dollar rises By Reuters

Written by Amanda Cooper and Tommy Wilkes

LONDON (Reuters) – Stocks hit a two-year low on Friday, the dollar touched a two-decade high and bonds were sold again as investors feared further interest rate hikes to control inflation, while British assets slumped after the announcement. of massive tax cuts financed by debt.

– British assets have already fallen, but extended their decline after the new British finance minister unveiled a historic agenda of tax cuts that would lead to a significant rise in government borrowing.

* UK bond yields were headed for their biggest daily rise in decades, as money markets anticipate Bank of England interest rates as high as 5% by May next year. The British pound lost 2%.

* The mood in the markets has been tense all week, with major central banks offering another 350 basis point interest rate hike to combat inflation, Japan’s intervention to prop up the yen, and pessimistic managers’ index data marketed on Friday, suggesting prices are deepening. slowdown in major economies.

* The US, UK, Sweden, Switzerland and Norway, among others, raised interest rates, but it was the Fed’s signal that it expects high rates to continue until 2023 in the country that caused the recent sell-off.

* The MSCI global stock index reached its lowest level since mid-2020 on Friday, after losing about 12% in the month since Federal Reserve Chairman Jerome Powell made it clear that lowering the level of inflation is necessary, despite the adverse effects that may bring.

The euro fell for the fourth consecutive day after data showed that the German economic slowdown deepened in September as consumers and businesses faced an unprecedented energy crisis and spiraling inflation.

* European stocks traded in the red for the second day in a row, weighed down by losses in everything from banking to natural resources to technology stocks.

* The European index fell by about 2.2%, while it fell by 1.94%, making it one of the worst performing European indices.

S&P emini futures are down 1.15%, indicating a lower trading session on Wall Street.

It fell 1.9%, as the British pound fell 2%, hitting another 37-year low and reaching $1.1022 at one point.

With US interest rates expected to rise faster and stay higher for longer, the dollar hit a two-decade high, while 10-year Treasury yields rose as investors dumped inflation-sensitive assets like bonds.

* The yield on the 10-year note rose 5 basis points to 3.776%, another 11-1/2-year high, and is on track for an eighth consecutive weekly rise.

Eurozone bond yields also rose strongly, with Italy’s 10-year bond yield hitting 4.294%, the highest since late 2013, ahead of Sunday’s Italian elections.

– The euro hit another 20-year low, falling to $0.9736.

* The dollar rose 0.4% against the Japanese currency to 142.97 per dollar. Few believe that the yen’s rally will continue as the BoJ remains dovish.

* The non-interest-paying entity came under pressure especially during the quarter due to higher yields. And it fell 1.55 percent to $ 1,644 an ounce, its lowest level in two years.

(Reporting by Tom Westbrook in Sydney; Editing in Spanish by Ricardo Figueroa)