* Stock indices down 1%-3%, US futures weak
* Cenbank chiefs reiterate inflation warning this week
* Sweden’s Riksbank latest to raise rates
* All eyes are on U.S. core price data, due later
* Chart: Overall asset performance http://tmsnrt.rs/2yaDPgn
*Graph: world exchange rates http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, June 30 (Reuters) – Shares fell on Thursday to extend what is the worst first half of the year for global stock prices on record, as investors fear the latest show of central bank resolve controlling inflation does not quickly slow down economies.
The heads of central banks from the Federal Reserve, the European Central Bank and the Bank of England met in Portugal this week and expressed their renewed commitment to controlling inflation, no matter how much pain it causes. .
While there wasn’t much new in the post, it was another warning that the era of cheap money that had turbocharged stock prices for years is coming to an end.
As of 07:40 GMT, the MSCI World Equity Index was down 0.48%, taking its year-to-date losses to more than 20% – the worst fall since the index’s inception.
The Euro STOXX fell 1.53%, while the German DAX weakened 2.34%. Britain’s FTSE 100 was down 1.64%.
US futures also fell, with few signs so far that the new quarter will attract brave bargain hunters. The dramatic decline in asset prices this year has been led by tech-heavy indices and stocks more sensitive to rising interest rates.
“Fed Chairman (Jerome) Powell and the FOMC (Federal Open Market Committee) don’t want to be wrong. They want to be 90% sure that inflation is down, not balanced,” said Steve Englander, Head of of G10 FX Global Research at Standard Chartered.
“So the signals they are sending are becoming increasingly hawkish as they see the market as perhaps prematurely pricing victory over inflation.”
Traders are now focused on price data from the US core expected later in the session, which should underline the scale of the inflation challenge.
Sweden’s Riksbank was the latest to raise borrowing costs, pushing its benchmark rate to 0.75% from 0.25% as expected and signaling another sharp tightening in an attempt to rein in price growth.
The Hungarian central bank also raised rates by 0.5% to 7.75%.
MSCI’s broadest Asia-Pacific ex-Japan equity index fell another 0.5%, taking its losses for the quarter to 10%.
The Japanese Nikkei fell 1.4%, although its decline this quarter was a relatively modest 5% thanks to a weak yen and the Bank of Japan’s stubborn commitment to super accommodative policies.
The need for stimulus was underscored by data showing Japanese industrial production fell 7.2% in May, while analysts had expected a drop of just 0.3%.
Chinese blue chips gained 1.6%, helped by a survey showing a marked recovery in services activity.
With investors so fearful of a global economic slowdown marked by central bank policy tightening, some analysts are poised to call for a rebound in the second half.
“It’s not that we think the world and economies are in great shape, just that an average investor expects economic catastrophe, and if that doesn’t materialize, risky asset classes could recoup most of their first-half losses,” JPMorgan wrote in a research note.
THE DOLLAR REIGNS SUPREME
Recession risk was enough to push US 10-year yields down to 3.06% from their recent high of 3.498%, although that remains up 74 basis points for the quarter and nearly 160 basis points base for the year.
The Fed’s hawkishness and investors’ desire for liquidity in difficult times gave the US dollar its best quarter since late 2016. The dollar index was slightly lower at 105.01, but a hair’s breadth from its recent two-decade high of 105.79.
The Swedish krona was little affected by the Riksbank rate hike, and was last at 10,688 kroner.
The euro edged higher to $1.0449, after losing 5.5% for the quarter so far and 8% for the year. It fell to a new 7.5-year low against the Swiss franc at 0.9963 francs.
The Japanese yen is in even worse shape, with the dollar up more than 12% this quarter and 18% this year to 137, its highest level since 1998.
Oil prices, which soared in 2022 along with most commodity prices, fell slightly on Thursday amid concerns about an unusual slowdown in U.S. gasoline demand.
OPEC and OPEC+ end two days of meetings Thursday without expecting to be able to pump much more oil despite US pressure to increase quotas.
Brent slid 0.8% to $115.33 a barrel, while U.S. crude fell 0.47% to $109.27.
(Additional report by Wayne Cole in Sydney)
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