Bond markets rallied on the dive for safety and on bets that interest rate hikes could be recalibrated, but it was gloom that hit stocks after Wednesday wiped out $25 billion from the shares of US retail giant Target which topped the stock. [.N]
Wall Street, which haemorrhaged $1.5 trillion in total, reopened another 1% down, Europe fell 2% as its retailers fell 2.5% [.EU]and Chinese tech companies also fell overnight [.SS]all of which left the MSCI global equity index sliding to year-and-a-half lows.
“Target and Walmart coming out with disappointing numbers really, really scared people off,” said Robert Alster, chief investment officer of Close Brothers Asset Management.
“We’re going to see a series of downward revisions to US GDP (forecast) now…it really does look like we’re hitting a faster-than-expected slowdown.”
This MSCI World Index is now down nearly 18% in what is its worst start to the year on a recent record.
Signs of flagging economies were highlighted as weekly U.S. jobless claims figures rose slightly and a survey of businesses in the mid-Atlantic region showed confidence about the coming months was at a 13-year low.
Goldman Sachs now estimates a 35% chance of a US recession over the next two years, while Morgan Stanley sees a 25% chance over the next 12 months.
Wall Street’s new selloff came after Wednesday’s rout sent the S&P 500 down 4% and the Nasdaq down 5%. [.N] while megacap giants Amazon, Nvidia and Tesla all fell nearly 7% and Apple fell 5.6%.
Shares in Asia-Pacific ex-Japan snapped four days of gains to falter 1.8%, led by a 1.65% loss for the resource-rich Australian index, a 2.5% decline in Hong Kong. The Tokyo Nikkei also lost 1.9%.
Hong Kong-listed tech giants were particularly hard hit, with the index falling nearly 4%. Chinese online giant Tencent fell more than 6% after posting zero revenue growth in the first quarter, its worst performance since its IPO in 2004.
China’s tech and real estate sectors are still reeling from a year-long government crackdown and a slowing economic outlook stemming from Beijing’s strict zero-COVID policy, even as the vice-president’s soothing comments Premier Liu He to technology executives boosted sentiment on Wednesday.
(Chart – Worst start to the year for global equities:
The focus remained on what central banks will do now as they walk a tightrope to try to regain control of inflation, which is now at 40-year highs in some countries, without causing recessions. painful.
“We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios,” German Finance Minister Christian Lindner said upon arriving for a two-day meeting of top central bankers near from Bonn.
Two top U.S. central bankers said on Wednesday they expected the Federal Reserve to downgrade to a more measured pace of rate hikes after July, but in Europe traders suddenly forecast up to four rate hikes. the ECB. He hasn’t raised interest rates in over a decade.
However, while things haven’t reached the tipping point, they are apparently heading “out of control. This is probably the most worrying part for the market,” market analyst Hebe Chen said. at IG.
In currency markets, the US dollar fell 0.3% against a basket of major currencies, after a 0.55% jump overnight that ended a three-day losing streak.
The euro gained nearly 1% on the ECB’s rate hike, while the Australian dollar jumped 1.6% and the New Zealand kiwi rebounded 1.2%, helped by an easing of the lockdown Shanghai COVID China. [FRX/]
US Treasuries continued to rally with yields – which move inversely to prices – as low as 2.77%, while Europe’s risk aversion saw German bond yields 10 years to fall well below the closely watched level of 1%. [GVD/EUR]
Inflation worries also saw oil prices fall again as fears of slowing economic growth and signs that Venezuelan oil could return to the market outweighed lingering fears over the tight global supply.
Brent crude fell from $110.41 to $108.04 a barrel in London, while US crude fell to $108.05 a barrel and gold, which has fallen more than 12% since March, hit $1,830 an ounce. [GOL/]
(Chart – Rising inflation driven by food and energy prices:
(Additional reporting by Francesco Canepa in Koenigswinter, Germany, Stella Qiu in Beijing and Alun John in Hong Kong; Editing by Chizu Nomiyama and Kirsten Donovan)
By Mark Jones