Futures contracts fall for fear of recession and inflation

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Global stocks fell ahead of key U.S. inflation data on Tuesday, weighed down by growing belief that raging price pressures, lingering COVID outbreaks and a slowing economy will lead to


recession

.

The dollar flirted with 20-year lows against the euro and 24-year lows against the yen, which hurt equities and commodities.

The MSCI All-World index of global stocks fell 0.5%, while futures on the S&P 500, Dow Jones and Nasdaq 100 fell between 0.5 and 0.6%, suggesting that Monday’s weakness could extend into a second day.

Adding to the jitters is the start of the second quarter earnings season, which kicks off in earnest this week.

“The US CPI report will be tomorrow’s main highlight, but we also shouldn’t forget the start of the second quarter earnings season, which will shed some light on the situation for companies, as the market narrative has flirted with the idea that the U.S. economy might already be in a recession,” Deutsche Bank strategist Jim Reid said.

The June consumer inflation report is due Wednesday and is expected to show another recovery. Economists forecast a reading of 8.8%, down from 8.6% in May, which would pave the way for even bigger interest rate hikes by the


Federal Reserve

which now balances the need to control inflation with the risk of causing a recession by doing so.

Market-based inflation expectations have eased in recent weeks, indicating that investors believe the central bank will be successful in containing price pressures, but perhaps less so in preventing a full economic slowdown.

The dollar was one of the main beneficiaries, both of the angst around the global economy, which triggered flows into safe havens, but also of the sharp rise in US rates. On Tuesday, the greenback was a hair’s breadth from pushing the euro below $1 for the first time in 20 years. The single currency was last down 0.4% at $1.00029.

In Europe, Russia temporarily halted natural gas flows to the region, increasing the risk of a generalized recession.

“Although a rally ensued very late into the week, the euro/dollar downtrend remains intact, and I see little reason why a full test/parity break will not occur. over the next few weeks,” NatWest Markets FX said. said strategist Neil Parker in a note.

The STOXX 600 fell 0.4%, while in Frankfurt the DAX fell 0.7% in early trading and London’s FTSE 100 fell 0.3%. Overnight in Asia, regional stocks fell to their lowest level in two years as a series of new lockdowns and restrictions on business activity in China to stem the spread of COVID-19 sparked protests. concerns about the impact on the economy.

The Shanghai Composite fell almost 1%, while Tokyo’s Nikkei fell 0.7% and Seoul’s Kospi lost 0.9%.

As investors fretted over the prospect of accelerating economic growth, oil broke off a three-day rally. China’s lockdowns partially offset supply-side constraints, tempering gains above $100 a barrel in recent weeks. The country is the world’s largest energy importer and any slowdown in manufacturing activity could seriously weigh on demand prospects.

Brent crude futures were last down 2% at $104.90 a barrel, bringing total losses for the past month to 15%, while WTI crude was down 2.1% at $101.78 per barrel.

“An increase in Covid cases in Shanghai will not help sentiment, especially as China continues to pursue its zero Covid policy, which creates significant demand risk for the market,” said strategist Warren Patterson. from ING.

Read more:According to the manager of a market-beating $500 million fund, predictable cash flow is king. It explains what investors should be looking for in the stocks they choose – and names 6 companies that fit the bill.

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