Stocks tumbled, and the dollar rose as fears of a hard landing grew

A broker interacts while trading on his computer at a stockbroking firm in Mumbai, India, February 1, 2020. REUTERS/Francis Mascarenhas

LONDON (Reuters) – Stocks tumbled on Thursday to a one-and-a-half year low and the dollar hit a two-decade high, as fears grew that rapidly rising inflation could lead to a sharp rise in interest rates that could lead to a sharp rise in interest rates. The global economy is at a standstill.

These nerves and the escalating war in Ukraine sent major markets in Europe down more than 2% in early trade and left the top MSCI World Stock Index (.MIWD00000PUS) at its lowest since late 2020 and is down nearly 20% for the year.

The Australian and New Zealand dollars, affected by global growth, fell about 0.8% to their lowest levels in almost two years. The Chinese yuan fell to its lowest level in 19 months while the dollar rose to its highest level since late 2002.

Almost all of the major volatility measures were indicative of risk. Bitcoin was caught selling risky crypto assets as it fell another 8% to $26,570, down from close to $40,000 just a week ago and nearly $70,000 last November.

“We’ve taken big strides,” said Carolyn Simmons, chief investment officer at UBS UK, also referring to bond markets and the economic outlook. “And when the market goes down, it tends to go down very quickly.”

Data on Wednesday showed that inflation in the United States is constantly rising. Core consumer prices rose 8.3% in April year-on-year, partially slower than the 8.5% pace in March, but still above economists’ expectations of 8.1%. Read more

US markets fell after the news, closing sharply lower, and futures prices were pointing to another round of 0.2%-0.7% of declines for the S&P 500, Nasdaq and Dow Jones Industrial indices later.

“We are now part of at least two additional (in the US) increases of 50 basis points on the agenda,” said Damien Rooney, director of institutional sales at Argonaut in Perth.

“I think we might have been delusional six months ago with US stocks rallying on the back of hopes, prayers and madness in M ​​shares,” he added.

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

Treasuries have been shown in both Europe and Asia, particularly at the long end, flattening the yield curve as investors prepare for short-term rises to hurt long-term growth – an outcome likely to slow or even reverse price increases.

The benchmark 10-year Treasury yield in the US fell by another 7 basis points to 2.8569% on Thursday. The gap between the two-year yields, which is highly sensitive to spikes, and the 10-year yield narrowed by 4.2 basis points.

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

“I think a lot of that is catching up with yesterday, and there’s also still a lot of negative sentiment in the US Treasury curve,” said Lynne Graham Taylor, senior interest rate strategist at Rabobank.

sale in may

Interest rate expectations are driving up the US dollar and causing the biggest losses in riskier assets that have jumped in two years of stimulus and low-interest lending.

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

Cryptocurrency markets are also collapsing, with the collapse of the so-called Stablecoin TerraUSD highlighting the turmoil as well as the selling of Bitcoin and the next largest cryptocurrency, Ether. Read more

The weak growth picture outside the United States is also undermining investor confidence, as the war in Ukraine threatens to trigger an energy crisis in Europe and prolong COVID-19 lockdowns in China, throwing yet another emboldening into supply chain chaos.

Nomura estimated this week that 41 Chinese cities are in full or partial lockdown, making up 30% of the country’s gross domestic product.

Real estate heavyweight Sunac (1918.HK) said it has missed bond interest payments and will lose more as China’s real estate sector remains in the grip of the credit crunch. Read more

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

The Australian dollar fell 0.8 percent to a two-year low of $0.6879. The kiwi fell by a similar margin to $0.6240, although the euro and yen held steady to keep the dollar index shy of a two-decade high.

Sterling was at a two-year low of just under $1.22, plus economic data there caused fears and growing fears that the Brexit deal with the European Union was in danger of unraveling again due to the same old problem of Northern Ireland’s borders. Read more

In commodities trading, Oil pulled back slightly from Wednesday’s rally on growth concerns.

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

Additional reporting by Tom Westbrook in Singapore. Editing by Kim Coogle

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