In This Article:
* Dollar hits 24-year high against yen, euro, sterling slide
* MSCI world stock index falls for fifth straight day
* Europe down 1%, S&P futures -0.5%, Nikkei closes down 1.7%
* Industrial metals suffer heavy falls
*
* U.S. yields climb, oil prices dipped
* Fed, ECB to hike rates aggressively in September
By Marc Jones
LONDON, Sept 1 (Reuters) - September got off to a bumpy start as persistent worries about rising global interest rates and recessions hounded stock and bond markets on Thursday and drove the safe-haven U.S. dollar to a 24-year high against the yen.
Near 1% falls in London, Frankfurt, Paris and Milan pushed the STOXX 600 to its lowest since mid-July and bond market selling continued after the biggest monthly rout in decades.
The bearishness was being fed by the possibility that the European Central Bank will raise its policy rate by a record 75 basis points next week following Wednesday's record high inflation reading.
Heavy shelling at Ukraine's giant Zaporizhzhia nuclear plant rattled nerves too. Russia had shut its main gas pipe to Europe for maintenance, while veteran investor Jeremy Grantham warned of an "epic finale" to the stock market "superbubble" inflated by years of cheap money.
"The whole world is now fixated on the growth-reducing implications of inflation, rates, and wartime issues such as the energy squeeze," Grantham said.
Add to that COVID in China, food and energy crises climate change and "the outlook is far grimmer than could have been foreseen," he added.
In currency markets, the dollar advanced 0.4% to a 24-year high of 139.5 yen as investors braced for higher U.S. rates while expecting anchored Japanese rates to go nowhere anytime soon.
The euro and sterling also fell as much 0.4% against the greenback. It left the euro just above parity at $1.0035, while the risk-sensitive Australian and New Zealand dollars hit their lowest levels since July.
Hawkish Fed expectations saw Treasury yields hit fresh highs. The yield on benchmark two-year notes jumped 6 bps to the highest since late 2007, at 3.51%, while the yield on 10-year bonds rose 6 bps to 3.20%.
Bets on a bumper ECB move next week were gaining traction too. Euro zone money markets were now pricing in a roughly 80% chance of a record 75 basis point hike up from 50% earlier in the week.
That sent benchmark German Bund yields to over 1.63%. Italy's 10-year bond yield jumped 8 basis points to its highest since mid-June at 3.978%, and the closely-watched gap between German and Italian bond yields expanded to its widest since late July.