NEW YORK (AP) – US markets plummeted ahead of Monday’s start, with the S&P 500 pointing to sword amid piercing pessimism over four decades of persistently high inflation.
Dow Jones futures lost more than 500 points, or 1.7%, while S&P futures fell 2.2%, or 91.50, to 3809. This is a drop of more than 20% since January 3 and if held until the markets close, this will push the main barometer of Wall Street health towards a bear market.
Economists expected a U.S. report on consumer prices on Friday to show that the worst inflation in generations slowed last month. But inflation accelerated to 8.6% in May.
This suggests that the Federal Reserve will have to continue to aggressively raise interest rates and take other measures to slow the economy and cool inflation.
The Fed is expected to raise its key short-term interest rate by half a percentage point at each of its next three meetings, starting next week. The half-point increase last month is the only time since the Fed has raised interest rates by as much as 2000.
Rising prices and expectations of Fed policy led to the highest level of government bond yields in two years since 2008, and the S&P 500 fell 18.7% from a record set in early January.
At the opposite end of the risk spectrum, cryptocurrencies are hit. Bitcoin fell another 12 percent to $ 24,000 early Monday, last seen in the second half of 2020. The price of bitcoin approached $ 68,000 late last year.
But the damage is widening, with retailers and others warning of impending profits.
Record low interest rates set by the Fed and other central banks have helped keep investment prices high. Now the “easy regime” for investors is off. As higher interest rates make loans more expensive, drawing on the costs and investments of households and companies, there is also a risk that the Fed will push the US economy into recession.
The fear is that food and fuel costs will continue to rise, no matter how aggressive the Fed, in part because of the crisis in Ukraine, which is the world’s main breadbasket.
In Europe, the German DAX lost 1.9% at noon and the CAC 40 in Paris fell 2.1%. The British FTSE 100 lost 1.6%.
Tokyo’s Nikkei 225 lost 3% to 26,987.44 and Hong Kong’s Hang Seng fell 3.4% to 21,067.58. In South Korea, Kospi fell 3.5% to 2504.51 as a truck strike added to concerns about supply chain disruptions. The Shanghai Composite Index fell 0.9% to 3,255.55.
Thailand’s benchmark fell 1.7%. Australian markets were closed for the holiday.
Regional concerns also weigh on sentiment as China fights more coronavirus outbreaks after easing some precautions in recent weeks.
This means that “former optimism about China’s reopening may also take a break, as the resumption of mass tests in Beijing and Shanghai seems to put Covid-19 risks at the forefront again,” IG’s Rong Yep said in a comment.
On Saturday, the national average for a gallon of ordinary gas exceeded $ 5, with a penny, according to the AAA auto club.
In another trade, US crude oil lost $ 2.09 to $ 118.58 a barrel in e-commerce on the New York Mercantile Exchange. He lost 84 cents to $ 120.67 on Friday.
Brent crude oil, the pricing standard for international trade, fell from $ 1.99 to $ 120.02 a barrel.
The dollar rose to 134.48 Japanese yen from 134.37 yen. For a short time it traded at about 135.20 yen. This was the lowest level of the yen since October 1998, prompting concerns.
Government spokesman Hirokazu Mizuno told reporters that the government was monitoring the situation and “will take action when necessary.”
“The recent sharp depreciation of the yen has increased uncertainty about prospects and made it difficult for companies to draw up business plans, so they are negative and undesirable for the economy,” Kyodo News Service quoted Bank of Japan Governor Haruhiko Kuroda as saying.
The euro fell to $ 1.0457 from $ 1.0518.
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