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Global stocks in red as consumers signal a coming recession

Global stocks in red as consumers signal a coming recession

LONDON/TOKYO, June 29 (Reuters) – Global stock markets fell for the second day in a row on Wednesday and bond yields edged lower on growing fears that policymakers intent on taming inflation could tip their economies in the recession.

A succession of weak data releases in Europe and the United States has not stopped central bankers from stepping up their warmongering rhetoric. More is likely later on Wednesday when the heads of the European Central Bank, US Federal Reserve and Bank of England speak at a central banking forum.

Data on Tuesday showed U.S. consumer confidence fell to a 16-month low in June, but several Fed policymakers pledged further rapid interest rate hikes, citing the need to rein in the economy. “unbridled” inflation read more .

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These US figures, following a series of dismal consumer confidence data across Europe, triggered steep falls on Wall Street, sending the S&P 500 and Nasdaq indices down 2% and 3% respectively ( .SPX), (.NQC1).

This weaker momentum continued on Wednesday, sending an Asian ex-Japan index down 1.4% (.MIAPJ0000PUS), while a pan-European stock index (.STOXX) fell 0.3%, sparking a rally of three days.

US and German 10-year bond yields fell 5-6 basis points, with the former down more than 30 basis points from mid-June highs.

Deteriorating consumer sentiment clearly points to a recession, Citi told clients.

After annual inflation prints of 7.5% to 7.9% in German provinces, a June reading of 8% is expected for the country later today, down from 7.9% in May.

Paul O’Connor, head of Janus Henderson’s multi-asset team in London, predicted “stormy” markets as long as growth-inflation question marks persist.

“The problem is that the level of inflation is so problematic in so many parts of the world and we are a long way from having central banks able to declare the job done,” O’Connor said.

“We will undoubtedly have downgrades to growth over the summer, but we will also have a growing perception of recession risk and I don’t think the markets are fully pricing that in.”

Sentiment had risen early on Tuesday after China eased quarantine requirements for inbound passengers in a major relaxation of its “zero COVID” strategy. [nL1N2YF06Q]

As parts of China’s stock market, including real estate, extended gains on Wednesday, the positive impact of the news largely faded – China’s blue chips, which hit four-month highs on Tuesday, fell 1.5% and Hong Kong lost 2% (.CSI300), (.HSI)

“Inevitably, markets tend to overreact to this kind of news,” said Carlos Casanova, senior economist at UBP in Hong Kong. “For this to be sustainable, we really want to see these measures materialize into real reopening.”

Wall Street futures stagnate , .

OIL AND DOLLAR

Inflation fears were further stoked by three straight days of rising oil prices that took Brent futures above $117 a barrel.

“The market is stuck in the back and forth between the current deteriorating macro backdrop and the looming threat of a recession, in the face of the strongest oil market fundamental setup in decades, perhaps ever,” he said. Mike Tran of RBC Capital told his clients.

The OPEC+ group of crude exporters began a two-day meeting on Wednesday, but a big change in policy seems unlikely, with UAE Energy Minister Suhail al-Mazrouei already indicating that his country pump close to capacity. Read more

Market jitters are driving fresh bid for the dollar, taking it to a one-week high against a basket of currencies.

The euro fell 0.6% against the greenback overnight but was flat at 0830 GMT at $1.0514 while the yen at 136.13 to the dollar was not far off the low of 24 years old from 136.7 last week.

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Reporting by Sujata Rao in London and Sam Byford in Tokyo; Editing by Nick Macfie

Our standards: The Thomson Reuters Trust Principles.

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