Stocks and oil tumble as recession fears mount

Stocks and oil tumble as recession fears mount

  • European stocks fall as risk on mood evaporates
  • Oil Prices Fall More Than 4% Before US Cap Move
  • Bond yields fall, but euro zone spreads widen
  • Dollar Bulls Send Yen to a New 24-Year Low
  • Chart: Global Asset Performance

LONDON, June 22 (Reuters) – Global stock markets and oil prices tumbled on Wednesday as persistent pounding over rising interest rates and recessions hit again, while the Japanese yen hit a new low of 24. years against a seemingly unstoppable US dollar.

The enthusiasm that had given Wall Street its best day in more than a month on Tuesday abruptly disappeared as Europe opened 1.5% lower and Brent crude prices plunged 4% after what had also been a trading session. pessimistic asian.

Bullish dollar enthusiasts also took no prisoners with bets that Federal Reserve chief Jay Powell will reiterate to Washington later the need to raise US rates hard and fast.

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Adding to the yen’s woes, the euro fell 0.3%, the oil-sensitive Norwegian krone tumbled 1.3% and the British pound fell 0.7% as data confirmed that the inflation is now at a 40-year high of 9.1%. read more

“It’s remarkable how quickly the market has turned around again after yesterday’s small drop in sentiment,” said Saxo Bank currency strategist John Hardy.

“The commodity market seems to be calling for a (global) recession,” he added. “And the dollar is going strong as a safe haven.”

Those recession concerns were also showing in bond markets, where US and German government bond yields fell as traders sought traditional safe havens.

The benchmark 10-year US Treasury yield fell to 3.233%, while Germany’s 10-year yield fell 7 basis points (bps) to 1.692%, after hitting its highest level since January. of 2014 at 1.928% last week.

But spreads between Germany and heavily indebted Italy widened again. His foreign minister, Luigi Di Maio, said he was leaving the 5 Star Movement to form a new parliamentary group to back the government, a move that threatens to bring new instability to Prime Minister Mario Draghi’s coalition. read more

Overnight, MSCI’s broader index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 2.3% to near a five-week low. Hong Kong-listed tech heavyweights tumbled more than 4% (.HSTECH), although Tokyo’s Nikkei (.N225) managed to hold its losses to just 0.4%.

Investors continue to assess how worried they should be about central banks potentially tipping the global economy into recession as they try to curb red-hot inflation with interest rate hikes.

Major US equity benchmarks rose 2% overnight on the possibility that the economic outlook may not be as dire as thought during last week’s trading, when the S&P 500 (.SPX) recorded its biggest weekly percentage drop since March 2020.

But the surge in Wall Street sentiment also didn’t appear to last with futures on the S&P 500 and Nasdaq both down almost 1% on Wednesday.

“I think this recent post-holiday bear market rally is a reflection of the uncertainty investors have as to whether or not we’ve seen inflation spike and the Fed’s hawkish stance or not. I think we’re close,” he said. Invesco’s Global Market Strategist for Asia Pacific David Chao.

US Federal Reserve Chairman Jerome Powell is set to begin his testimony to Congress on Wednesday with investors seeking more clues as to whether another 75 basis point rate hike is expected in July.

Economists polled by Reuters expect the Fed to make a 75 basis point interest rate hike next month, followed by a half percentage point hike in September, and not regress to quarter percentage point moves until November in the earliest Read More

Most other global central banks are in a similar situation apart from the Bank of Japan, which last week pledged to maintain its ultra-low interest rate policy. By contrast, the Czech central bank was expected to raise its rates by 125 bps later on double-digit inflation.

That gap between low interest rates in Japan and rising US rates has weighed on the yen, which hit a new 24-year low of 136.71 per dollar in Asian trading, before turning lower. firm at 136.20.

Minutes from the Bank of Japan’s April policy meeting released on Wednesday showed the central bank’s concerns about the impact the currency’s slide could have on the country’s business environment. read more

The other big move was in the commodity markets. The 4% drop in oil prices came amid recession concerns and US President Joe Biden was expected to request a temporary suspension of the 18.4 cents per gallon federal tax on Wednesday. on gasoline, a source briefed on the plan told Reuters.

Brent fell $5 to $109.79 a barrel, while US crude fell 5.9% or $5.37 to $104.15.

“The latest in a long line of attempts to moderate price increases at pumps is having the desired effect. However, it is not guaranteed whether this knee-jerk reaction will stand the test of time,” said Stephen Brennock of PVM, pointing to a expected increase in summer demand.

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Additional reporting by Sam Byford in Tokyo and Shadia Nasralla in Bangalore

Our standards: the Thomson Reuters Trust Principles.

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