August 4, 2022
Bonds Rally on Economic Fear; Tech Stocks Gain: Markets Wrap
Government bonds rallied from the UK to the eurozone to the US Thursday as economic and market anxieties tested the equity market’s bullish resolve. US futures rose.
Treasury yields were lower in the wake of an outsized rate increase by the Bank of England in the face of mounting recession risks. Contracts on both the S&P 500 and the Nasdaq 100 pushed higher, following the tech-heavy Nasdaq’s advance of 19% from its June low.
BOE Raises Rates by Most Since 1995, Warns of Long Recession
The Bank of England unleashed its biggest interest-rate hike in 27 years as it warned the UK is heading for more than a year of recession under the weight of soaring inflation. The half-point increase to 1.75%, predicted by most economists, on Thursday was backed by eight of the central bank’s nine policy makers, who also kept up a pledge to act forcefully again in the future if needed.
“The committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response,” Governor Andrew Bailey told reporters in London. “All options are on the table for our September meeting, and beyond that.”
South Asia Debt Woes Evoke Fears of Another 1997-Style Crisis
Pakistan is scrambling for a bailout to avert a debt default as its currency plummets. Bangladesh has sought a preemptive loan from the International Monetary Fund. Sri Lanka has defaulted on its sovereign debt and its government has collapsed. Even India has seen the rupee plunge to all-time lows as its trade deficit balloons.
Economic and political turbulence is rattling South Asia this summer, drawing chilling comparisons to the turmoil that engulfed neighbors to the east a quarter century ago in what became known as the Asian Financial Crisis.
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