On Friday, world stocks remained near one-month lows, and government bond markets came under renewed selling pressure.
Interest rates rose in the eurozone, the United Kingdom, Switzerland, Denmark, Norway, Mexico, and Taiwan on Thursday, and central bankers vowed to keep raising rates to keep prices down.
This week, the hawkish message from the EU Central Bank and the Federal Reserve put an end to hopes that interest rates would soon peak.
The Stoxx 600 index in Europe fell 1.1%, and futures trade suggested that Wall Street’s benchmark S&aP 500 index would open 1.4% lower later in the day.
The Nikkei index of Japan, which measures the performance of the country’s stock market, was on track to have its worst week in more than two months as the largest MSCI index of Asia-Pacific shares outside of Japan closed at its lowest level.
The ECB, like the Fed, raised interest rates by 50 basis points. Both chose a smaller increase this time but warned that more was coming.
Its hawkish message sparked a second day of selling across European bond markets, with yields on benchmark German 10-year bonds rising by up to 14 basis points.
On Friday, the yield on Germany’s rate-sensitive two-year bond rose to 2.5%, its highest level since 2008.
Italian and German bond yields increased to 218 basis points, indicating that investors were bracing for a sharp growth slow, while Germany’s yield curve continued to invert.
Relief at the apparent resolution of a protracted accounting access dispute with the United States was insufficient to lift sentiment in China, where markets are rife with uncertainty over an uncertain reopening.
Meanwhile, manufacturing activity in Japan contracted at the fastest rate in more than two years in December, while retail sales in the US fell more than expected in November.
The prospect of further global monetary tightening made investors concerned about long-term growth.
The dollar steadied in currency markets after making significant gains in the previous session.
The dollar index, which compares the greenback to six major currencies, was roughly unchanged at 104.51. This came after a 0.85% increase overnight, the largest since late September.