In This Article:
* U.S. stock futures down 0.6%
* European stocks heading for worst week in 2 months
* MSCI Asia ex-Japan index drops 2.87%
*
By Carolyn Cohn and Alun John
LONDON, May 6 (Reuters) - The U.S. dollar hit 20-year highs and world stocks fell towards their lowest in over a year on Friday as markets anticipated more U.S. interest rate rises, while Asian stocks fell on worries about the hit to growth from China's zero-COVID policy.
The U.S. currency was heading for its fifth straight week of gains after the Federal Reserve raised rates by 50 basis points this week. The market is pricing in a more than 90% chance of a 75 bps hike in June, according to Refinitiv data.
U.S. payrolls data due later on Friday will help traders gauge the strength of the U.S. economy. Economists polled by Reuters predicted the data would show the United States created 391,000 new jobs in April, versus 431,000 a month earlier.
"The trend is still for a strong and very tight labour market, which is feeding into wage increases and is an issue for inflation longer term," said Gergely Majoros, a member of the investment committee at asset manager Carmignac. This made it hard for the Fed keep prices stable, he added.
"Job creation is still too hot for the Fed to achieve its mandate."
The dollar hit a 20-year high of 104.06 against an index of currencies and gained 0.19% to 130.42 yen, also close to its highest in 20 years.
The euro fell 0.38% to $1.0499, near recent five-year lows.
Sterling fell to its lowest against the dollar in nearly two years after dropping 2.2% on Thursday.
The Bank of England raised rates by 25 basis points as expected, but two policy makers expressed caution about rushing into future rate hikes.
MSCI's world equity index fell 0.52%, towards its lowest since Feb 2021.
U.S. stock index futures dropped 0.6% after the Dow Jones Industrial Average and the S&P 500 both slid more than 3% overnight, and the Nasdaq Composite shed 4.99% in its biggest single-day plunge since June 2020.
European stocks fell more than 1% to their lowest since mid-March and were heading towards their worst week in two months. Britain's FTSE dropped 0.8%.
"We are still left with an environment where growth is slowing and we are starting to see evidence that sectors such as U.S. housing are slowing, global PMIs are showing the toll and accumulated savings are getting spent down," said Grace Peters, EMEA head of investment strategy at JPMorgan Private Bank.
"But based on the latest U.S. data, we are comfortable with tracking for inflation peaking in Q2."