Covid lockdowns have left China's economy stuttering
Global stock markets sank Thursday, propelled by rampant inflation and growing recession fears as another major Chinese city went into lockdown.
Frankfurt, London and Paris equities closed down between 1.5 and two percent as record-high eurozone inflation fuelled fears that borrowing costs are set to climb even higher even as the region faces rocketing winter energy costs due to Russia’s war on Ukraine.
The European Central Bank will announce its latest monetary policy decision next Thursday, after delivering its first rate hike in a decade in July.
“More pain is likely for investors as Europe’s energy crunch gets worse”, said City Index analyst Fawad Razaqzada.
Meanwhile the yen plunged to a new 24-year low against the dollar on Thursday as Japan sticks with its long-standing monetary easing policies in contrast to tightening by the US Federal Reserve.
One dollar was more worth more than 140 yen for the first time since 1998 in afternoon deals in Europe, as the greenback also strengthened against other currencies.
The greenback was also at its strongest level against the pound since the height of the pandemic in 2020, with sterling buying less than $1.16.
On Wall Street, the Dow was down 0.5 percent at 31,358.97 points in late morning trading.
– ‘Outlook is poor’ –
“Markets remain unable to snap their recent losing streak, with investors still positioning for tougher times ahead,” said Interactive Investor analyst Richard Hunter.
“Central to current concerns are recessionary fears in the US and a beleaguered China.
“With the world’s two largest economies under pressure, the immediate outlook is poor.”
Asian equities weakened further Thursday as traders continued to digest shrinking factory activity in powerhouse economy China.
Shanghai also dropped after news that the Chinese city of Chengdu would effectively lock down around 16 million people in a bid to contain a Covid-19 outbreak, likely dealing another blow to a stuttering economy.
“With Covid outbreaks unlikely to diminish as we head into winter, the prospects for a China rebound this side of next year have virtually disappeared, raising concerns over a prolonged global slowdown”, said CMC Markets analyst Michael Hewson.
Meanwhile on Wall Street the tech-heavy Nasdaq was down around two percent, with investors taking a fright over the fortunes of NVIDIA, a California-based maker of high-performance graphics cards popular with gamers.
Shares in the company were down 11.4 percent nearing midday trading.
“NVIDIA shares have slumped sharply on the open after the US government ordered the company to halt sales of its top AI chips to China and Russia, with the company saying it cost them up to $400m in the current quarter”, Hewson said.
“With Chengdu also going into lockdown and China being one of its biggest markets, the next quarter is likely to be a big headwind for the rest of the sector,” he added.
Oil prices slumped more than two percent on growth worries as well as concerns easing about a possible decision by OPEC+ members to cut production to support prices that Saudi officials had posited last month.
“I’m not sure Saudi Arabia expected markets to test their nerve so quickly but it seems the suggestion that a reduction next week won’t be considered has removed the production cut risk for now,” said analyst Craig Erlam at OANDA trading platform.
– Key figures at around 1530 GMT –
New York – Dow: DOWN 0.5 percent at 31,358.97 points
EURO STOXX 50: DOWN 1.7 percent at 3,456.70
London – FTSE 100: DOWN 1.9 percent at 7,148.50 (close)
Frankfurt – DAX: DOWN 1.6 percent at 12,630.23 (close)
Paris – CAC 40: DOWN 1.5 percent at 6,034.31 (close)
Tokyo – Nikkei 225: DOWN 1.5 percent at 27,661.47 (close)
Hong Kong – Hang Seng Index: DOWN 1.8 percent at 19,597.31 (close)
Shanghai – Composite: DOWN 0.5 percent at 3,184.98 (close)
Euro/dollar: DOWN at $0.9940 from $1.0054 on Wednesday
Pound/dollar: DOWN at $1.1534 from $1.1622
Euro/pound: DOWN at 86.13 pence from 86.50 pence
Dollar/yen: UP at 139.95 yen from 138.96 yen
West Texas Intermediate: DOWN 2.7 percent at $87.14 per barrel
Brent North Sea crude: DOWN 2.5 percent at $93.12
burs-lcm/rl
