LONDON: Sharp falls in European and Asian stock markets followed Wall Street’s worst day since mid-2020 on Thursday, as stark warnings from some of the world’s biggest retailers underscored how badly inflation was biting.
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.
Europe was down 2% at lunch, led by a 2.5% plunge in its retail sector, while scarlet red US futures and a sharp drop in Chinese tech overnight at next day brought the MSCI World All Countries down to year-and-a-half lows.
This 47-country index is now down nearly 18% in what is its worst start to a year on a recent record.
“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 experiencing a faster-than-expected slowdown.”
The S&P 500 was down 4% on Wednesday while the Nasdaq fell nearly 5% as interest-rate-sensitive megacap stocks Amazon, Nvidia and Tesla fell nearly 7% while Apple fell 5%. .6%.
Shares in Asia-Pacific ex-Japan then 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 first-quarter revenue growth, 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.
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 had 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 ECB hikes. . He hasn’t raised interest rates in a decade.
However, while things haven’t reached the point of no return, they seem to be heading “out of control”. This is probably the most worrying part for the market,” said Hebe Chen, market analyst 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 0.4% on the ECB rate hike, while the Australian dollar gained 0.8% and the New Zealand kiwi dollar rebounded 0.6%, helped by an easing of the lockdown Shanghai COVID China.
US Treasuries rallied overnight and were bright at 2.84% in Europe where the risk adverse mood also saw the German 10-year bond yield – which moves inversely to price – fall back below the closely watched level of 1%.
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.
(Additional reporting by Francesco Canepa in Koenigswinter, Germany, Stella Qiu in Beijing and Alun John in Hong Kong; Editing by Nick Macfie and Chizu Nomiyama)