Stocks and commodities tumbled as China’s worsening Covid outbreak compounded fears sparked by faster Federal Reserve tightening.
Hong Kong and Shanghai led the selling, with both markets suffering hefty losses, while Tokyo, Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta were also deep in the red. The Stock Exchange of Thailand Index was down 0.7% at 3.10pm.
The Stoxx 600 Europe Index fell 1.5%, with miners and energy firms at the forefront of losses. US equity futures dipped, with S&P 500 futures about 0.7% lower after the gauge shed 2.8% Friday. West Texas Intermediate futures slid more than 4% to trade below $100 a barrel.
Fears of a wider lockdown in Beijing are spooking investors already fretting about the risk of a global slowdown as the Fed raises rates to tame inflation. A broad gauge of Chinese stocks dropped to the lowest in almost two years as policy makers raced to stem an outbreak that’s already hobbled Shanghai amid the government’s steadfast adherence to its Covid-zero policy.
“The worry is the current policy support that the government has already put in place may not be effective because of the Covid policies,” Jenny Zeng, AllianceBernstein co-head of Asia Pacific fixed income, said on Bloomberg Television.
Treasuries snapped the rout of the past week that roiled markets while the dollar extended an advance as investors opted for safe havens. The euro erased gains made after Emmanuel Macron’s win on a pro-business, pro-Europe platform in the French election removed a key risk for markets.
“Markets had well anticipated Macron’s victory, so they are already moving on. There are other worries weighing today,” said Frederic Leroux, member of the strategic investment committee at Carmignac Gestion. “Inflation remains a key worry.”
The outlook for inflation continues to hang over markets even as the pull back in commodities may provide some cushion. Fed Jerome Powell had outlined his most bold approach yet to reining in surging prices and the European Central Bank signalled stronger tightening.
Palm oil rallied after top producer Indonesia said it will ban all exports of cooking oil, a surprise move that threatens to worsen global food inflation and aggravate volatility in crop markets reeling from the war in Ukraine.
US Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks as the war enters its third month.
Events to watch this week:
Tech earnings include Alphabet, Meta Platforms, Amazon, Apple
EIA oil inventory report, Wednesday
Australia CPI, Wednesday
Bank of Japan monetary policy decision, Thursday
US 1Q GDP, weekly jobless claims, Thursday
ECB publishes its economic bulletin, Thursday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 1.5% as of 9:06 a.m. London time
Futures on the S&P 500 fell 0.6%
Futures on the Nasdaq 100 fell 0.4%
Futures on the Dow Jones Industrial Average fell 0.6%
The MSCI Asia Pacific Index fell 2.1%
The MSCI Emerging Markets Index fell 2.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.4% to $1.0750
The Japanese yen rose 0.1% to 128.31 per dollar
The offshore yuan fell 0.8% to 6.5786 per dollar
The British pound fell 0.6% to $1.2760
Bonds
The yield on 10-year Treasuries declined seven basis points to 2.83%
Germany’s 10-year yield declined seven basis points to 0.90%
Britain’s 10-year yield declined seven basis points to 1.90%
Commodities
Brent crude fell 4% to $102.40 a barrel
Spot gold fell 0.8% to $1,916.01 an ounce