SINGAPORE – World stocks headed for their worst week since markets' pandemic meltdown in March 2020, as interest rate hikes in the United States and Britain and a surprise one in Switzerland set investors on edge about future economic growth.
The Bank of Japan was the only outlier in a week where money prices rose around the world, sticking with its strategy of pinning 10-year yields near zero on Friday.
The yen was down more than 1 percent to 133.88 per dollar in volatile trade. US futures attempted a bounce.
MSCI's broadest index of Asia-Pacific shares outside Japan fell to a five-week low, dragged by selling in Australia where the ASX 200 dropped 1.8 percent. Japan's Nikkei fell 1.7 percent and headed for a weekly drop of almost 7 percent.
S&P 500 futures rose 0.8 percent and Nasdaq 100 futures rose 1 percent but they are well underwater on the week.
EuroSTOXX 50 futures rose 1 percent and FTSE futures rose 0.5 percent.
"We are entering a tough phase of the regime shift, as the risks over economic growth add to the already hot inflationary backdrop," said Vincent Mortier, chief investment officer at Europe's biggest fund manager, Amundi.
"The current repricing is taking most of the overvaluation out of the market, but current levels are vulnerable to any deterioration in corporate fundamentals."
World stocks are down 5.7 percent for the week so far, on course for the steepest weekly percentage drop in more than two years.
Bonds and currencies were jittery after a rollercoaster week. In recent sessions, the has dollar pulled back from a 20-year high, but it hasn't fallen far and looks set to end the week steady.
The Swiss franc's leap made for an additional drag this week since it is used as a funding currency and often changed for dollars before those are swapped for high yielders – meaning dollars get sold when that trade reverses.
The greenback was firm on Friday and apart from surging on the yen, it lifted about 0.3 percent to $1.0518 on the euro and rose about 0.5 percent to $0.7012 per Aussie.
"The path of least resistance is lower stocks and higher dollar," said Spectra Markets' Brent Donnelly. "The Fed don’t know where inflation is going, and neither do we."
As well as the Fed and the Swiss central bank, the Bank of England announced a 25 basis point rate rise this week. It was smaller than expected but prompted gilts to sell and sterling to rise on bets that future hikes would come thick and fast.
"If a central bank does not move aggressively, yields and risk price in more in the way of rate hikes down the road," said NatWest Markets' strategist John Briggs.
"Markets may just be continuously adjusting to an outlook for higher global policy rates … as global central bank policy momentum is all one way."
Sterling rose 1.4 percent on Thursday and held gains into Friday as it heads for a steady week. Two-year gilts rose 18 basis points on Thursday to 2.143 percent.
US labor and housing data came in soft on Thursday, on the heels of disappointing retail sales figures, with the worries knocking the dollar and helping Treasuries.
Benchmark 10-year Treasury yields fell nearly 10 bps overnight but wobbled higher to 3.2313 percent during Asia's morning. Yields rise when prices fall.
Growth fears took oil on a brief trip lower before prices steadied. Brent crude futures were last at $119.70 a barrel. Gold held at $1,844 an ounce and bitcoin was kept under pressure at $20,700.