(Bloomberg) — Investors rushed to the safety of the U.S. dollar, while global stocks slid ever closer to a bear market, as the Federal Reserve’s aggressive tightening path and China’s Covid lockdowns worsened the outlook for economic growth.
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The greenback extended a two-year high, rising on Monday against all of its major peers. U.S. equity-index futures and European stocks fell, sending the MSCI gauge of world stocks 16% lower from a November peak. Oil declined as concern over slowing demand in Asia outweighed a Group-of-Seven pledge to ban Russian oil. Treasuries resumed a selloff, with the five-year rate jumping to the highest since 2008.
A wave of risk aversion is sweeping through global markets after Friday’s U.S. jobs data left little room for a change of course in the Fed’s rate-increase and quantitative-tightening plans. While that sent the S&P 500 Index to the longest streak of weekly losses since 2011, sentiment took a further knock over the weekend as Chinese Premier Li Keqiang warned the nation’s employment situation had turned grave because of Covid restrictions.
The short-term outlook for stocks “is still messy and there may be more downside as markets worry about a significant economic slowdown or ‘hard landing’ and aggressive interest-rate hikes,” Diana Mousina, senior economist at AMP Investments, wrote in a note.
Futures on the S&P 500 and Nasdaq 100 indexes fell at least 0.9% each, after five successive weeks of declines for U.S. equities. Europe’s Stoxx 600 gauge declined for a fourth day, testing a two-month low. An Asia-Pacific equity gauge shed 1.7%. The Bloomberg Dollar Spot Index rose for a third day.
In China, the yuan dropped amid data showing stagnating imports and the slowest export growth in dollar terms since 2020, underlining the economic toll of Covid lockdowns. Premier Li Keqiang warned about the employment situation as Beijing and Shanghai tightened virus curbs.
Oil posted a 1.3% loss. Crude is being buffeted by the demand hit from China’s outbreak and supply risks linked to Russia’s war in Ukraine.
Volatility remains the watchword in global markets on growth, consumer prices and war risks. Inflation data this week from the U.S. and elsewhere could drive bond-market swings.
President Vladimir Putin is speaking at Russia’s May 9 Victory Day parade, which marks the anniversary of Nazi Germany’s surrender in 1945. He may indicate his next steps for the Ukraine invasion.
In the latest Russia-related developments, the G7 most-industrialized countries pledged to ban the import of Russian oil. The European Union is working on a similar plan but Hungary remains a holdout and the bloc’s talks are set to continue.
Australian bonds extended a selloff. The nation’s currency fell below 70 U.S. cents for the first time since January, and Bitcoin dipped toward levels last seen in 2021. India’s rupee hit a record low against the dollar.
Here are key events to watch this week:
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Russian President Vladimir Putin to speak on Victory Day in Russia. Monday
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Philippines presidential election. Monday
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Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic speak. Tuesday
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New York Fed President John Williams, Fed Governor Christopher Waller speak. Tuesday
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Atlanta Fed President Raphael Bostic speaks. Wednesday
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China PPI, CPI. Wednesday
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U.S. CPI. Wednesday
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San Francisco Fed President Mary Daly speaks. Thursday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.5% as of 8:34 a.m. London time
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Futures on the S&P 500 fell 0.9%
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Futures on the Nasdaq 100 fell 0.9%
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Futures on the Dow Jones Industrial Average fell 0.7%
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The MSCI Asia Pacific Index fell 1.7%
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The MSCI Emerging Markets Index fell 1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.5%
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The euro fell 0.3% to $1.0524
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The Japanese yen fell 0.5% to 131.20 per dollar
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The offshore yuan fell 0.7% to 6.7619 per dollar
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The British pound fell 0.5% to $1.2281
Bonds
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The yield on 10-year Treasuries advanced five basis points to 3.17%
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Germany’s 10-year yield advanced two basis points to 1.15%
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Britain’s 10-year yield advanced four basis points to 2.04%
Commodities
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Brent crude fell 1% to $111.25 a barrel
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Spot gold fell 0.8% to $1,869.11 an ounce
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