Stocks wobble near recent lows, sterling rallies after BoE warning

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LONDON, Oct 12 (Reuters) – European stock markets struggled to recover from recent lows on Wednesday, while the pound rebounded after hitting a 13-day low overnight, the Bank of London said. England having reiterated that it will end its emergency bond purchases at the end. of the week.

Global stock markets have fallen sharply in recent sessions, hit by heightened fears of an economic slowdown amid warnings from the International Monetary Fund and World Bank.

Asian stocks remained stuck near their lowest level in two years, weighed down by signs that China will persist with its strict COVID-19 policies.

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The MSCI World Stock Index, which tracks stocks from 47 countries, was flat on the day at 11:00 GMT, holding near the previous day’s two-year low (.MIWD00000PUS).

The European STOXX 600 index rose 0.1%, after falling for the past four consecutive sessions (.STOXX).

“We have seen a very rapid decline in equity markets over the past few days, obviously due to heightened fears of recession,” said Axel Rudolph, market analyst at IG Group.

“I think we’re seeing some short coverage and I wouldn’t be surprised if that also fuels US markets later in the day with people positioning themselves more neutral ahead of Thursday’s CPI data.”

US producer price data due at 12:30 GMT should keep the Fed on course for rate hikes. Consumer price data (CPI) is due Thursday.

Wall Street futures rose slightly, with Nasdaq 100 futures up 0.8% and S&P 500 futures up 0.6%.

The pound hit a 13-day low of $1.0925 during Asian trading hours after Bank of England Governor Andrew Bailey said pension funds and other investors hit by a surge in UK gilt yields had just three days to resolve their issues before central. bank terminates its emergency bond purchase plan.

But the BoE has also privately signaled to lenders that it stands ready to extend support beyond Friday’s deadline if necessary, the Financial Times reported.

As of 11:03 GMT, the pound was up 1.1% on the day at $1.1081.

MARKET CONSTRAINT

Britain’s economy contracted unexpectedly in August, according to GDP data.

IG’s Rudolph said the tension in UK markets – which began when the UK government announced its “mini-budget” budget plans on September 23 – is contributing to broader negative sentiment in the market.

“It’s just another nail in the coffin as far as sentiment goes and market sentiment has really taken a hit the past few days,” he said.

Former US Treasury Secretary Larry Summers criticized the British government. “It is very rare that I have seen such a misguided combination of policy and political communications that the new Conservative government has delivered,” he told an investment conference in Sydney.

Summers also said the Bank of England risked showing its hand by announcing the end date of its buyback program

“I would have thought that by now it was something that should be universally understood that if you are doing a military intervention in a country it is a terrible idea to announce the deadline by which you will withdraw because it just provides a roadmap for your opposition and encourages them to wait for you.”

Yields on UK gilts rose across a range of maturities, with 2-year yields recording the biggest increase.

The euro was flat at $0.9713 as eurozone government bond yields rose, following weakness in the UK gilt market.

The yield on German 10-year government bonds hit its highest level since 2011 .

The US dollar index fell about 0.2%. Overnight, the dollar rose above the 146 per yen level for the first time in 24 years, prompting authorities in Tokyo to pledge to intervene if necessary.

Minutes from the Fed’s latest policy meeting are expected to be released later today.

The IMF’s chief economist said on Tuesday that central banks’ fight against inflation could take another two years, increasing unemployment and lowering living standards for many around the world.

On Monday, the president of the World Bank and the managing director of the IMF warned of a growing risk of recession.

The war in Ukraine also weighed on market sentiment. A leak on a pipeline carrying oil from Russia to Europe has added to concerns about energy security.

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Reporting by Elizabeth Howcroft; Editing by Alex Richardson and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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