As officials speak, it is only rising sharply and global stock markets are plagued by fears of inflation

As officials speak, it is only rising sharply and global stock markets are plagued by fears of inflation

The yen surged on Friday as Japanese policymakers made unusual comments about the currency’s weakness, while global stocks fell to a two-week low as fears of rising inflation and interest rates in the United States and Europe translated into worry about global growth. After sharp losses on Thursday, S&P futures in the United States fell 0.17 percent, signalling a lower open on Wall Street.

The yen has been plowing 20-year lows against the dollar and seven-year troughs against the euro on expectations the BOJ will continue to lag behind other major central banks in exiting stimulus policy. “Generally if you look back at BOJ behavior, if they say they will take appropriate action that is seen as the top level of intervention they go through before physical intervention,” said Adam Cole, chief currency strategist at RBC Capital Markets.

Japan’s government and the central bank said they were concerned by recent sharp falls in the yen in a rare joint statement, the strongest warning to date that Tokyo could intervene to support the currency. After a meeting with his Bank of Japan (BOJ) counterpart, top currency diplomat Masato Kanda told reporters that Tokyo will “respond flexibly with all options on the table”.

Meanwhile, the ECB said on Thursday it would deliver its first interest rate rise since 2011 next month, followed by a potentially larger move in September. Analysts at Deutsche and Morgan Stanley lifted their eurozone rate hike forecasts on Friday. Investors expect the Federal Reserve to raise interest rates by 50 basis points next week, especially if U.S. consumer price data on Friday confirms elevated inflation.

MSCI’s world equity index fell 0.54% to its lowest since May 26 and was heading for a fall of more than 2%for the week. The dollar fell 0.45% to 133.77 yen but rose 0.18% to a three-week high against a basket of major currencies. The euro fell 0.23% to 2-1/2 week lows at $1.059. European stocks fell 1.5% to three-week lows.

The consensus forecast sees a year-over-year inflation rate for May of 8.3%, unchanged from April. “A lot of focus is on this current number, it’s not going to be a big move,” said Matthias Scheiber, global head of portfolio management for multi-asset solutions at All spring. “I don’t think it will derail what central banks currently have on their minds.” However, rate rises may hit growth, Scheiber said, adding that he had turned slightly underweight on equities in recent weeks as a result of this concern.

It was the 17th week in a row of outflows for European equities in the week to Wednesday, according to BofA, with $2.1 billion leaving the space, as the sector has been hit hard by the Russia-Ukraine war. Pressure is rising on other central banks to tighten, with the BoE and Sweden’s Riksbank expected to hike rates again next week. Britain’s FTSE 100 fell 1.2% to 3-week lows.

The Bank of England said on Friday it was satisfied that Britain’s top banks could be shut down without putting at risk the stability of the financial system or disrupting customers. The two-year U.S. Treasury yield, which rises with traders’ expectations of higher fed fund rates, continued its climb, hitting its highest since Nov 2018 at 2.862%.

The yield on benchmark 10-year Treasuries dipped to 3.035% compared with its U.S. close of 3.042%. Ten-year German government bond yields weakened to 1.413%, after hitting their highest since 2014 on Thursday. Italy’s 10-year yield rose to its highest since 2018 at 3.78% on Friday before easing to 3.73%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9%, weighed down by a 1.2% drop in resources-heavy Australia and a 1.1% retreat in South Korea. Japan’s Nikkei fell 1.5%. However, continued strong buying by foreign investors and cautious hopes of regulatory easing on tech firms lifted China stocks, despite news that the cities of Beijing and Shanghai were back on COVID-19 alert. China’s blue-chip CSI300 index was up 1.5%, while Hong Kong shares trimmed earlier losses to be off 0.2%.

Oil rose and was on track for another weekly gain supported by solid fuel demand in the United States, although fresh COVID-19 alerts in Shanghai and Beijing curbed gains. U.S. crude gained 0.75% to $122.42 a barrel. Brent crude rose 0.88% to $124.13 per barrel. Spot gold fell 0.36% to $1841.07 per ounce.

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