Global stocks fall as growth fears persist, safe havens gain

A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, US, May 19, 2022. REUTERS/Andrew Kelly

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  • Global stocks fall as Wall Street’s rally fails
  • Bonds rise on safety call, dollar pulls back from highs

NEW YORK (Reuters) – Global stocks fell further on Thursday, unable to sustain a late rally on Wall Street, as investors dumped stocks on fears of slowing growth and bought safe-haven assets such as government debt and the Swiss franc.

Supply chain problems continued to fuel inflation and growth fears, as Cisco Systems Inc (CSCO.O) warned of persistent component shortages, sending its shares down 13.7%. The drop made it the latest big stock this week to post its biggest drop in more than a decade. Read more

Data showed that factory production in the US Mid-Atlantic region slowed much more than expected in May with business expectations for the next six months the weakest in more than 13 years, according to a regional Fed survey. Read more

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Some of the big growth stocks that underperformed this year posted gains but the rally faltered. The Dow Jones Industrial Average (.DJI) fell 0.75%, the S&P 500 (.SPX) lost 0.58% and the Nasdaq Composite (.IXIC) lost 0.26%.

Big slippages for Walmart on Tuesday and Target on Wednesday frustrated investors’ sentiment who questioned rising costs across the supply chain, said Michael James, managing director of equity trading at Wedbush Securities.

“I got quite a shock to the portfolio managers system with a combination of these two,” James said. “It’s hard to repair that kind of damage, as it’s built up on a very tough New Year that tech investors have been through,” he said.

But James said there are those who see the market as being very oversold and “it’s set to have some kind of bounce”.

Rick Meckler, head of hedge fund LibertyView Capital Management LLC, said traders are looking for a catalyst that will transform the market as the near-term end approaches.

But, he said, “there may still be enough fear among investors to see more bottom bills.”

Liquidity hoarding reached its highest level since September 2001, indicating strong bearish sentiment, according to Louise Dudley, portfolio manager at Federated Hermes Ltd.

Goldman Sachs estimates a 35% chance of a US recession in the next two years, while Morgan Stanley sees a 25% chance of a recession in the next 12 months.

US spot energy and natural gas prices soared to their highest levels in more than a year in some areas of the US as Americans turned on air conditioners during the spring heat wave. Read more

The MSCI Worldwide Stock Index (.MIWD00000PUS) is down 0.65% and the STOXX All-European 600 Index (.STOXX) is down 1.37%.

The S&P 500 is down about 18% from its record close on January 3, and the MSCI is down the same level since it peaked on January 4.

Bear Markets S&P 500

The German 10-year bond yield fell below 1% and US Treasury yields fell as more weak US economic data raised fears that the Federal Reserve’s strong monetary tightening could hurt the global economy.

The yield on the 10-year Treasury fell 3.8 basis points to 2.846%, after hitting a three-week low of 2.772%.

The dollar is down overall, down more than a two-decade high, as most of the other major currencies have attracted buyers.

The dollar index fell 0.896%, with the euro rising 1.11% to $1.0582. The Japanese yen strengthened 0.35% to 127.79 per dollar.

The Swiss franc rose after SNB President Thomas Jordan indicated on Wednesday that the SNB is ready to act if inflation pressures persist. Read more

Worst start to the year for global stocks

Central banks have been walking a tightrope, trying to regain control of decades-old high inflation without causing a painful recession.

“We will have to discuss what we can do together in our own areas of responsibility to avoid stagflation scenarios,” German Finance Minister Christian Lindner said upon arrival for a two-day meeting of senior central bank officials near Bonn.

Oil prices rebounded from two days of losses in a volatile session, buoyed by a weak dollar and expectations that China may ease some lockdown restrictions that could boost demand.

US crude futures rose $2.62 to settle at $112.21 a barrel. Brent closed up $2.93 at $112.04 a barrel.

US gold futures settled up 1.4% at $1,841.20 an ounce, as weaker dollar and Treasury yields polished the appeal of bullion as a safe haven.

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Additional reporting by Herbert Lash and Mark Jones in London, Francesco Canepa in Koenigswinter, Germany, Stella Keogh in Beijing, Alun John in Hong Kong; Editing by Bernadette Bohm, David Gregorio and Richard Boleyn

Our Standards: Thomson Reuters Trust Principles.

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