Stocks plummet, dollar soars as fears of hard landing grow


A broker reacts while trading on his computer terminal at a securities brokerage firm in Mumbai, India February 1, 2020. REUTERS/Francis Mascarenhas

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  • Global stocks fall to a year-and-a-half low, down almost 20% since the start of the year
  • Europe opens 2% lower on US stock futures
  • Dollar hits 2-year highs on AUD and NZD
  • Bitcoin drops to new 16-month low
  • Copper loops at lowest since October

LONDON, May 12 (Reuters) – Shares fell to a one-and-a-half-year low on Thursday and the dollar hit its highest level in two decades as fears grew that rapidly rising inflation could lead to a sharp rise in interest rates which brought the global economy to a halt.

Those nerves and the ever-escalating war in Ukraine sent major European markets down more than 2% at the start of trading and left MSCI’s best global equity index (.MIWD00000PUS) at its lowest since late 2020 and down nearly 20% for the year.

The Australian and New Zealand dollars, sensitive to global growth, fell about 0.8% to near two-year lows. The Chinese yuan slid to a 19-month low as the dollar hit its highest level since late 2002 .

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Almost all major volatility gauges were signaling danger. Bitcoin was caught in the sellout of risky crypto assets as it fell another 8% to $26,570, after being near $40,000 just a week ago and nearly $70,000 in last November.

“We’ve had big changes,” said Caroline Simmons, UBS’s UK chief investment officer, also referring to bond markets and economic expectations. “And when the market drops, it tends to drop pretty quickly.”

Wednesday’s data had shown that US inflation was consistently high. Consumer prices rose 8.3% in April year on year, slightly slower than March’s 8.5% pace, but still above economists’ forecast of 8.1%. Read more

U.S. markets had skyrocketed after the news, closing sharply lower, and futures prices pointed to another round of declines of 0.2% to 0.7% for the S&P 500, Nasdaq and Dow Jones Industrial plus late.

“We are now well integrated with at least two more (US) 50 basis point hikes on the agenda,” said Damian Rooney, director of institutional sales at Argonaut in Perth.

“I think we were probably delusional six months ago with the rise in US stocks on hopes and prayers and the madness of stocks meme,” he added.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 2.3% to a 22-month low overnight. The Japanese Nikkei (.N225) fell 1.8%.

Treasuries were offered in both Europe and Asia, particularly in the long run, flattening the yield curve as investors braced for short-term increases to hurt long-term growth – a result which would most likely slow or even reverse rate hikes.

The benchmark 10-year Treasury yield fell in the United States and fell another 7 basis points to 2.8569% on Thursday. The spread between 2-year rates, which are very sensitive to rising rates, and 10-year rates narrowed by 4.2 basis points.

In Europe, Germany’s 10-year yield, the bloc’s benchmark, fell 12 basis points to 0.875%, its lowest in nearly two weeks.

“I think it’s largely a catch-up to what happened yesterday, and there’s still a lot of negative sentiment in the US Treasury curve,” Lyn Graham-Taylor said. , senior rate strategist at Rabobank.

SELL IN MAY

The rate outlook drives the US dollar higher and weighs most heavily on riskier assets that have surged in two years of stimulus and low-rate lending.

The Nasdaq (.IXIC) is down almost 8% in May so far and more than 25% this year. Hong Kong’s Hang Seng Tech index (.HSTECH) slid 1.5% on Thursday and is down more than 30% this year.

Cryptocurrency markets are also crashing, with the collapse of so-called stablecoin TerraUSD highlighting the turmoil as well as selling off in bitcoin and ether. Read more

Weaker growth outside the U.S. is also shaking investor confidence, as war in Ukraine threatens to spark an energy crisis in Europe and lengthening COVID-19 lockdowns in China throw a new wrench. in the chaos of the supply chain.

Nomura estimated this week that 41 Chinese cities are in full or partial lockdown, representing 30% of the country’s GDP.

Heavyweight property developer Sunac (1918.HK) said it missed a bond interest payment and will miss more as China’s property sector remains in the grip of a credit crunch. Read more

The yuan fell to a 19-month low of 6.7631 and fell almost 6% in less than a month.

The Australian dollar fell 0.8% to a near two-year low of $0.6879. The kiwi slid a similar margin to $0.6240, although the euro and yen held steady to keep the dollar index just below a two-decade high.

The pound was at its lowest level in two years, at just under $1.22, and economic data there sparked concerns and concerns grew that Britain’s Brexit deal with the EU was in danger of collapsing again due to the same old problem of the Northern Irish border. Read more

In commodity trading, oil somewhat dampened Wednesday’s push on growth concerns.

Brent crude futures fell 2.3% to $104.93 a barrel, while the highly growth-sensitive metals copper and tin fell more than 3.5% and 9 % respectively. This marked the lowest level for copper since October.

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Additional reporting by Tom Westbrook in Singapore; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.


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