Stocks and commodities tumbled as China’s worsening Covid outbreak compounded fears sparked by faster Federal Reserve tightening. Bonds rose.
The Stoxx 600 Europe Index fell more than 2%, with miners and energy firms at the forefront of losses. U.S. equity futures fell, with S&P 500 contracts down about 1% after the gauge shed 2.8% Friday. West Texas Intermediate futures slid more than 4% to trade below $100 a barrel.
Fears of a wider lockdown in Beijing are spooking investors already fretting about the risk of a global slowdown as the Fed raises rates to tame inflation. A broad gauge of Chinese stocks dropped to the lowest in almost two years as policy makers raced to stem an outbreak that’s already hobbled Shanghai amid the government’s steadfast adherence to its Covid-zero policy.
“The worry is the current policy support that the government has already put in place may not be effective because of the Covid policies,” Jenny Zeng, AllianceBernstein co-head of Asia Pacific fixed income, said on Bloomberg Television.
Treasuries snapped the rout of the past week that roiled markets, with the 10-year benchmark yield sliding 9 basis bonds. The dollar extended an advance as investors opted for safe havens. The euro fell after Emmanuel Macron’s win on a pro-business, pro-Europe platform in the French election removed a key risk for markets.
“Markets had well anticipated Macron’s victory, so they are already moving on. There are other worries weighing today,” said Frederic Leroux, member of the strategic investment committee at Carmignac Gestion. “Inflation remains a key worry.”
The outlook for inflation continues to hang over markets even as the pull back in commodities may provide some cushion. Fed Jerome Powell had outlined his most bold approach yet to reining in surging prices and the European Central Bank signaled stronger tightening.
Palm oil rallied after top producer Indonesia said it will ban all exports of cooking oil, a surprise move that threatens to worsen global food inflation and aggravate volatility in crop markets reeling from the war in Ukraine.
U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks as the war enters its third month.
Events to watch this week:
- Tech earnings include Alphabet, Meta Platforms, Amazon, Apple
- EIA oil inventory report, Wednesday
- Australia CPI, Wednesday
- Bank of Japan monetary policy decision, Thursday
- U.S. 1Q GDP, weekly jobless claims, Thursday
- ECB publishes its economic bulletin, Thursday
Some of the main moves in markets:
- The Stoxx Europe 600 fell 2.2% as of 9:52 a.m. London time
- Futures on the S&P 500 fell 1.1%
- Futures on the Nasdaq 100 fell 1%
- Futures on the Dow Jones Industrial Average fell 1%
- The MSCI Asia Pacific Index fell 2.1%
- The MSCI Emerging Markets Index fell 2.5%
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.5% to $1.0740
- The Japanese yen rose 0.4% to 128.02 per dollar
- The offshore yuan fell 0.9% to 6.5858 per dollar
- The British pound fell 0.8% to $1.2741
- The yield on 10-year Treasuries declined nine basis points to 2.81%
- Germany’s 10-year yield declined eight basis points to 0.89%
- Britain’s 10-year yield declined seven basis points to 1.90%
- Brent crude fell 4.5% to $101.87 a barrel
- Spot gold fell 0.7% to $1,917.15 an ounce – Bloomberg.