HomeBusinessWorld stocks tumble on Chinese COVID outbreaks

World stocks tumble on Chinese COVID outbreaks

  • Chinese stocks fall as coronavirus cases rise in Beijing
  • US yield curve nears most inverted level since 2000
  • Dollar, Bonds Firm Ahead of Fed Minutes
  • The oil price is falling again after a loss of almost 9% last week

LONDON, Nov 21 (Reuters) – World stocks and oil prices fell on Monday as new COVID-19 restrictions in China exacerbated concerns about the global economic outlook.

The safe-haven dollar rebounded while the US Treasury yield curve remained strongly inverted, suggesting that investors remain alert to the risks of a global recession.

Coronavirus outbreaks across China are a setback to hopes of an easing of strict pandemic restrictions, one of the reasons cited for a 10% drop in oil prices last week and the lackluster open in European stocks on Monday .

Beijing’s most populous district urged residents to stay home on Monday as the number of COVID cases rose in the city, while at least one district in Guangzhou went into lockdown for five days.

This sent major European stock markets downhill (.STOXX)with markets in London, Frankfurt and Paris all opening weaker, while S&P 500 futures and Nasdaq futures fell 0.5%.

MSCI’s broadest index of global equities (.MIWD00000PUS) decreased by 0.5%.

The US Thanksgiving holiday on Thursday combined with the distraction of the World Cup could make for lean trading, while Black Friday sales will provide insight into how consumers are doing and the outlook for store stocks.

According to Fiona Cincotta, a senior market analyst at City Index in London, the week is starting off feeling risk-free.

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“There is a demand for safe havens like the dollar and riskier assets are on the line,” she added.

“The other thing to keep in mind is we’ve had a strong rally, so there’s a sense of need to take stock of where we are.”

The dollar rose 0.9% against the Japanese yen to 141.67, its highest level since November 11. The pound and euro both fell 0.8%, approaching last week’s 18-week highs.

The Chinese yuan fell to a 10-day low against the dollar on Monday, as worsening COVID-19 infection rates and new mobility restrictions dented market sentiment.

PRICED FOR RECESSION

Raphael Bostic, president of the Atlanta Federal Reserve, said on Saturday that he was willing to step down to a half-point rate hike in December, but also underlined that rates are likely to stay high longer than markets expect.

Bond markets suspect the Fed will tighten policy too far and push the economy into recession. The government bond yield curve, as measured by the difference between yields on two-year and ten-year bonds, is around -70 basis points (bps), approaching levels last seen in 2000

The two-year Treasury yield was up 3 basis points on the last day to 4.53%, while the 10-year yield was up 2 basis points to 3.84%

At least four Fed officials are scheduled to speak this week ahead of a speech from Chairman Jerome Powell on Nov. 30 that will set the outlook for interest rates at the December policy meeting.

Central banks in Sweden and New Zealand are expected to raise interest rates this week, perhaps by as much as 75 basis points.

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The Fed chorus has helped stabilize the dollar after the recent sharp sell-off, though speculative positioning in futures has netted the currency short for the first time since mid-2021 for the first time since mid-2021.

“Given how far U.S. bond yields and the dollar have fallen in recent weeks, we think there is a good chance they will recover if the Fed minutes are consistent with members’ recent aggressive language,” said Jonas Goltermann, a senior market economist at Capital Economics.

Meanwhile, the turmoil in cryptocurrencies continued with the FTX exchange, which has filed for protection in the US bankruptcy court saying it owes its 50 largest creditors nearly $3.1 billion.

In commodity markets, gold fell 0.7% to $1,737 an ounce after falling 1.2% last week.

Oil futures failed to find a bottom after last week’s thrashing, with Brent crude plunging nearly 9%.

Brent last fell 1% to $86.71, while US crude oil futures lost 0.5% to $79.71 a barrel.

Reporting by Wayne Cole; Edited by Kenneth Maxwell

Our standards: The Thomson Reuters Principles of Trust.

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