Stocks and bonds extended their selloff on Thursday as a hawkish drumbeat from central banks and a lockdown in China further frayed investor nerves. The dollar gained.
(Bloomberg) — Stocks and bonds extended their selloff on Thursday as a hawkish drumbeat from central banks and a lockdown in China further frayed investor nerves. The dollar gained.
A global equity index hit a six-week low as Nasdaq 100 futures fell after a sales warning from Nvidia Corp. Miners led declines in Europe as commodities dropped amid concerns that aggressive tightening and China’s slowdown will lower demand.
Industrial metals fell after China moved to lock down Chengdu’s 21 million residents to contain a Covid-19 outbreak, while oil and natural gas retreated as Europe considers various measures to intervene in the energy market. Commodity-linked and Group-of-10 currencies weakened and the yen dropped to a 24-year low.
Meanwhile, Russia is considering a plan to buy as much as $70 billion in yuan and other “friendly” currencies this year to slow the ruble’s surge, before shifting to a longer-term strategy of selling its holdings of the Chinese currency to fund investment.
The market jitters come after August’s losses, reflecting fears of an economic downturn alongside restrictive monetary policy to choke inflation. A global bond rout saw the two-year Treasury yield touch 3.50% for the first time since 2007.
Stocks are entering a month that is often poor for returns and an equity bounce from June lows is fizzling as the Federal Reserve pushes back against bets on tempered rate hikes. A hotly anticipated US jobs report on Friday has the potential to tip the scales toward a third jumbo-sized hike in interest rates later this month.
Some of Wall Street’s biggest banks now expect the European Central Bank to hike rates by 75 basis points at next week’s meeting, while the latest economic data underlined a parlous outlook for China.
“The Fed effect is now melding with other global factors such as China’s growth slowdown and Europe’s stagflation to create a more fraught global macro environment with higher rates and lower growth,” said Alvin Tan, strategist at RBC Capital Markets in Singapore. “It is this combination of hawkish central banks led by the Fed, China’s slowdown and Europe’s stagflation that is now driving volatility across global markets.”
Among individual moves, Reckitt Benckiser Group Plc’s shares fell on news that Chief Executive Officer Laxman Narasimhan will step down at the end of the month to pursue a new opportunity in the US.
US chipmakers fell in premarket trading after Nvidia warned that new rules governing the export of artificial-intelligence chips to China may affect hundreds of millions of dollars in revenue.
Here are some key events to watch this week:
- ECB Governing Council members due to speak at event Tuesday through Sept. 2
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday. Winner announced Sept. 5
Will Chinese sovereign bonds outperform Treasuries? China is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.7% as of 5:50 a.m. New York time
- Futures on the Nasdaq 100 fell 1.1%
- Futures on the Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 fell 1.4%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0029
- The British pound fell 0.2% to $1.1599
- The Japanese yen fell 0.1% to 139.15 per dollar
Bonds
- The yield on 10-year Treasuries was little changed at 3.19%
- Germany’s 10-year yield advanced four basis points to 1.58%
- Britain’s 10-year yield advanced six basis points to 2.86%
Commodities
- West Texas Intermediate crude fell 1.4% to $88.33 a barrel
- Gold futures fell 0.4% to $1,719.20 an ounce
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