Global shares get pummeled by investor fears of economic slowdown as inflation heats up

May 19, 2022

Global shares get pummeled by investor fears of economic slowdown as inflation heats up

Traders have been cheered by earnings but are still concerned about inflation.
Spencer Platt/ Getty Images

Global shares slid Thursday, under pressure from investor concern about surging inflation and slowing growth.
Major retailers like Target and Walmart have warned about the impact of rising prices on their customers.
The S&P 500 on Wednesday saw its biggest one-day loss since the height of the pandemic in March 2020.

Global shares dropped on Thursday, as evidence of mounting inflation around the world fueled investor fears of a slowdown in economic growth, which hit tech stocks and cryptocurrencies.

Several major US retailers, including Target and Walmart, have warned about the impact of rising prices on the consumer. Meanwhile, the number of voices on Wall Street predicting recession is growing, with Goldman Sachs CEO David Solomon the latest to sound the alarm.

The MSCI All World index fell 0.7% on the day, heading for a seventh consecutive weekly loss. The index, a broad gauge of global equities, has lost about 18% so far this year, roughly in line with the S&P 500.

On Wednesday, US stock indexes suffered their biggest one-day fall since the depths of the pandemic, with the S&P 500 losing 4%, and the Nasdaq 100 falling 5.1%.

Index futures suggested no respite at the start of trading later. S&P 500 and Dow Jones futures were down 0.5%, while those on the tech-heavy Nasdaq 100 were 1.7% lower.

"The brief bounce in risk assets in the first half of the week looks to have now turned entirely, as inflation and growth fears reassert themselves," strategists at IG said in a daily note.

"The inability of stocks to rally for more than a few days sends a message that investors remain firmly pessimistic for the time being."

In Europe, the pan-continental STOXX 600 fell 2.4%, under pressure from losses in financial services and tech stocks. London's FTSE 100 was among the worst-performing indices in the region, shedding 2.7% in its largest one-day fall since early March. The slide followed inflation data on Wednesday that showed consumer price pressures in April hit their highest level in 40 years.

With fears growing over the prospect of the world economy experiencing stagflation — a toxic combination of high inflation and slowing growth — government bond yields eased, reflecting a rise in their price, but were still heading for another weekly increase.

The yield on the 10-year Treasury note briefly rose above 3% on Wednesday before subsiding overnight. The yield was last at 2.828%, down 6 basis points.

"More broadly, yesterday, it was another day where deleveraging was back at the top of the agenda, with equities falling once more — yesterday's bear market rally didn't last long! — and bonds selling-off a little, with the 10-year Treasury popping above 3% once more," Caxton FX strategist Michael Brown said.

"The technical picture is as grim as the fundamental one for equities, with the S&P future again failing to remain above 4,050, and having broken sub-4,000 once more," he added.

In cryptocurrencies, bitcoin dropped 3.4% on the day to around $28,904, while ether lost almost 6% to trade at $1,918. Solana and cardano each fell 10%. The market has regained some ground in the past week, but sentiment is fragile.

Bitcoin has fallen for an unprecedented seven weeks in a row, which analysts at crypto exchange Coinbase said was a record.

"Putting that figure into historical perspective, it's close to the 62% decline that BTC experienced in the early pandemic panic of 2020 — but well short of the 80%-plus selloff the cryptocurrency saw during the 2018 bear market," they said.

Read the original article on Business Insider