US stocks record longest run of quarterly declines since 2008 crisis

US stocks posted their longest streak of quarterly losses since the market collapsed in 2008, weighed down by central banks’ determination to tame inflation by raising interest rates.

The blue-chip S&P 500 index fell 1.5% on Friday, bringing the loss in the quarter between June and September to 5.3%. The S&P has now fallen for three straight quarters, the most since the prolonged bear market that accompanied the global financial crisis.

The tech-heavy Nasdaq Composite also fell 1.5% on Friday, hitting the index’s worst closing level since July 2020 to end the quarter down 4.1%.

The liquidation of US assets this week continued after the The Bank of England stepped in ease the turmoil in the UK government debt market.

It has been a difficult year for equities as central banks, including the US Federal Reserve, have signaled they will stay the course on higher interest rates, reducing support for economic growth, in an effort to contain inflation. Lael Brainard, Vice President, Friday morning reaffirmed this point of viewacknowledging that while the Fed was aware of the market turbulence, it remained committed to tighter monetary policy.

Peter Tchir, head of macro strategy at Academy Securities, said investors accept the Fed’s commitment to calm inflation, even if stocks are battered in the process.

“Today, I think the market realizes that the economy is potentially slowing rapidly, but the Fed may do nothing to stop that. With gilt volatility and liquidity deteriorating in all markets in United States, more and more investors are concerned about the potential for a rapid and significant pullback in stock and bond prices,” Tchir said.

Emmanuel Cau, head of European equity strategy at Barclays, said: “Central bankers are telling us they’re going to get inflation under control, it’s going to happen. [the] expense of the economy, and we don’t care about the markets right now.

US bonds sold off on Friday, but remained above lows reached earlier in the week. Prices plunged last Friday and Monday after the UK announced £45 billion in unfunded tax cuts. UK and US bonds then stabilized after the BoE intervened this week with a new long-term debt buying program.

The yield on the 10-year U.S. Treasury note, the global benchmark for borrowing, rose 0.03 percentage points to 3.81% after rising above 4% on Wednesday for the first time since 2010. increase as their prices fall.

But despite some recovery in Treasury debt since the BoE’s intervention, the rapid tightening of monetary policy this year has both the two-year rating, which is highly sensitive to political expectations, and the 10 rating. years, well on their way to their biggest annual sale. -offs on record.

Column chart of percentage point change, yearly display The 10-year Treasury yield is on track for a record high in 2022

On Friday, the yield on UK 10-year debt fell 0.05 percentage point to 4.08%. UK yields on all maturities have oscillated on a historic scale in recent sessions, with the 10-year jumping more than 0.4 percentage points on Monday before falling almost 0.5 percentage points on Wednesday.

Cau said central bankers had struggled to tell the market that the BoE action should not have been seen as the start of a broader return to supportive policy. “The [Federal Reserve] has been very clear that what the BoE is doing should be seen in isolation, and the Fed will stick to its plan. The [European Central Bank] does the same,” he added.

London’s FTSE 100 gained 0.2% on Friday, while the European regional Stoxx 600 rose 1.3%.

In Asian stock markets, the Japanese Topix index fell 1.8% on Friday. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen lost 0.6%, while Hong Kong’s Hang Seng gained 0.3%.

Additional reporting by Hudson Lockett in Hong Kong

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