(Bloomberg) — Volatility continued to grip global financial markets as US stocks failed at an attempt to rebound from a crushing five-day rout sparked by harsh central bank tightening programs.

The S&P 500 fell after rising more than 1.7% from Monday’s fresh bear-market low. The advance faltered as the Federal Reserve’s James Bullard added to a chorus of officials saying more rate hikes are needed and the risks to the economy remain elevated. Risk assets have been in a tailspin since the Fed delivered a third jumbo hike and warned of more pain to come.

UK markets remained in turmoil days after the new prime minister unveiled sweeping tax cuts that threaten to add to inflationary pressures. The 30-year UK government bond yield topped 5% for the first time in two decades and the pound held near $1.07.

Investors are also digesting a flurry of data on Tuesday, including core capital goods orders and consumer sentiment, that paint a picture of an economy that can likely withstand additional harsh central bank tightening.

Markets have been dealing with “one rolling shock after another,” and haven’t been able to fully recover, Jack Janasiewicz, portfolio manager with Natixis Investment Managers Solutions, said in an interview at Bloomberg’s New York headquarters.

“I think what’s driving the markets is they just aren’t comfortable with what’s the terminal rate that the Fed needs to get to — is it here, is it much higher, is it close?,” he said “That uncertainty creates interest-rate volatility and I think that’s what the market’s having a tough time digesting.”

But every tumultuous market day is a step closer to recovery, according to Julie Biel, portfolio manager for Kayne Anderson Rudnick.

“I think there’s more realism, there’s more understanding that a soft landing is just impossible to really navigate when you’ve let out this much fiscal and monetary policy,” she said. “It’s just not possible to engineer this with inflation this high. And so that realism is a positive thing. The thing is that we still kind of have a long way to go in terms of a possible correction.”

Story continues

Beyond the US

The UK’s stock and bond markets have lost at least $500 billion in combined value since Liz Truss took over as Prime Minister and traders remained wary of the risk that the currency could slump to parity with the dollar after the Bank of England indicated it may not act before November to stem the rout.

Volatility across markets was also reflected by the risk of future price swings, which reached the highest since the beginning of the pandemic, as shown by a Bank of America index.

Meanwhile, Germany suspects the damage to the Nord Stream pipeline system used to transport Russian gas to Europe was the result of sabotage. Benchmark European gas prices climbed as much as 19% on Tuesday.

How much damage is a strong dollar causing? That’s the theme of this week’s MLIV Pulse survey. It’s brief and we don’t collect your name or any contact information. Please click here to share your views.

Key events this week:

• Fed’s Mary Daly, Raphael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday

• Euro zone economic confidence, consumer confidence, Germany CPI, Thursday

• US initial jobless claims, GDP, Thursday

• Fed’s Loretta Mester, Mary Daly speak at events, Thursday

• China PMI, Friday

• Euro zone CPI, unemployment, Friday

• US consumer income , University of Michigan consumer sentiment, Friday

• Fed’s Lael Brainard and John Williams speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.5% as of 12:30 p.m. New York time

• The Nasdaq 100 fell 0.3%

• The Dow Jones Industrial Average fell 0.6%

• The MSCI World index fell 1.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.2% to $0.9589

• The British pound rose 0.1% to $1.0702

• The Japanese yen was little changed at 144.81 per dollar

Cryptocurrencies

• Bitcoin rose 1.9% to $19,477.6

• Ether rose 1.4% to $1,343.03

Bonds

• The yield on 10-year Treasuries advanced five basis points to 3.97%

• Germany’s 10-year yield advanced 12 basis points to 2.23%

• Britain’s 10-year yield advanced 26 basis points to 4.51%

Commodities

• West Texas Intermediate crude rose 1.1% to $77.59 a barrel

• Gold futures rose 0.3% to $1,638.20 an ounce

(Previous version corrected the spelling of Atlanta Fed President Raphael Bostic in the ‘key events’ bullet)

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