Title: Stocks set for weekly drop as rates reality bites

Apr 08, 2022 02:30AM ET

By: AnalysisWatch

World stock markets were on course for a weekly decline on Friday as the prospect of agriculturalists aggressively hiking global interest rates finally started to unnerve investors. Bonds depreciated and the dollar may be looking at its best week in a month of yield gains.

MSCI's broadest index of Asia-Pacific stocks outside Japan held stable on Friday but incurred a weekly drop of about 1.5%. Japan's Nikkei index gained modestly but remained on track for a weekly drop of nearly 2.6%.

Futures on the S&P 500 index were flat, while futures on the FTSE index and futures on the EuroSTOXX 50 index gained about 0.8% as traders awaited markets in London and Europe to catch up with Thursday's modest rise on Wall Street.

The late rally has strengthened US indices somewhat, but all are still lower for the week, led by a 2.5% drop in the yield-sensitive Nasdaq as interest rates threaten to increase.

The Federal Reserve minutes this week affirmed that policy makers are ready to move quickly to increase rates to curb inflation.

Europe's looming embargo on Russian coal is expected to add to economic hurt and price pressures, though it has also pushed Indonesian stocks to a record high in Jakarta, where coal exporters expect better prices.

A tight contest for the presidential nomination in France is adding to jitters at a time when there is a mounting sense that financial markets are heading into a new era.

Rabobank researchers say the slowdown in demand is reminiscent of Wile E. Coyote's stock markets: It runs in the air for a while before it falls off a cliff.

Expectations of interest rate hikes are also growing with inflation in Canada, South Korea, Australia, and New Zealand.

In France, a victory for far-right leader Marine Le Pen over incumbent President Emmanuel Macron, while still improbable, is now within the margin of error, according to opinion polls, and the euro dropped to a one-month low of $1.0855 during Asian trading.