LONDON / TOKYO, June 29 (Reuters) – Global stock markets fell for the second day in a row on Wednesday and bond yields fell sharply due to growing fears that policymakers pledge to cut inflation will dump their economies in recession.
A succession of weak data releases in Europe and the United States has not stopped central banks from doubling hawk rhetoric. There are likely to be more things later on Wednesday when officials from the European Central Bank, the US Federal Reserve and the Bank of England speak at a central bank forum.
Tuesday’s data showed U.S. consumer confidence fell to a 16-month low in June, but several Fed policymakers promised further rapid interest rate hikes, citing the need to control inflation “unbridled.”
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These US figures, after a series of terrible consumer confidence data across Europe, caused sharp falls in Wall Street, which caused the S&P 500 and Nasdaq indices to fall by 2% and 3% respectively ( .SPX), (.NQC1).
This weaker pace was maintained on Wednesday, sending an ex-Japan Asian index 1.4% lower (.MIAPJ0000PUS), while a pan-European equity index (.STOXX) fell 0.3%, with a three-day rise.
U.S. and German 10-year bond yields fell 5 to 6 basis points, the former down more than 30 bp from mid-June highs.
The deterioration in consumer sentiment clearly points to a recession, Citi told its customers.
After 7.5% -7.9% annual inflation in the German provinces, a reading of 8% in June is expected for the country at the end of the day, compared to 7.9% in May.
Paul O’Connor, head of Janus Henderson’s multi-asset team in London, predicted “stormy” markets while questions about growth and inflation persisted.
“The problem is that the level of inflation is so problematic in so many parts of the world and we are so far away that central banks can declare that the job is done,” O’Connor said.
“We will certainly get growth rebates over the summer, but we will also have a growing perception of the risk of recession and I don’t think the markets are priced entirely for that.”
Sentiment had risen early on Tuesday in the news that China was reducing quarantine requirements for incoming passengers in a major easing of its “zero COVID” strategy. [nL1N2YF06Q]
As shares of the Chinese stock market, including property, widened gains on Wednesday, the positive impact of the news largely faded: Chinese 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, UBP’s senior economist in Hong Kong. “In order for this to be sustainable, we really want these measures to materialize into a real reopening.”
Wall Street futures flattened.
OIL AND DOLLAR
Fears of inflation have been further fueled by three consecutive days of oil price gains that have brought Brent crude oil futures above $ 117 a barrel.
“The market is caught in the push between the current deterioration of the macro context and the imminent threat of a recession, in the face of the most solid fundamental oil market configuration in decades, perhaps ever,” said Mike Tran of RBC Capital.
The OPEC + group of crude exporters began a two-day meeting on Wednesday, but a major policy change seems unlikely, as UAE Energy Minister Suhail al-Mazrouei said his country is approaching its capacity. Read more
Market concern is driving a renewed supply for the dollar, which raises it to a one-week high against a basket of currencies.
The euro fell 0.6% against the dollar overnight, but remained stable at 08:30 GMT at $ 1.0514, while the yen at 136.13 per dollar was not far from the low. of 246.7 last week’s 246.7.
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Report by Sujata Rao in London and Sam Byford in Tokyo; Edited by Nick Macfie
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