- Global stocks are struggling after the biggest drop in index history
- Dollar rises against Aussie, Kiwi
- 10-year Treasury yield remains below 3%
- Chinese markets are stable in the red sea of Asia
- Metals are flexing as recession jitters build
LONDON, July 1 (Reuters) – The second half of the year began with another record-breaking decline for global stock markets on Friday, as recession fears that had built up in recent weeks also pushed oil and metals lower again.
MSCI’s index of world shares (.MIWD00000PUS) had its worst start to a year since its inception in 1990 over the past six months, read more and a 1 percent early decline in Europe (.STOXX) and Wall Street futures pointed to more pain.
Asia also declined (.MIAPJ0000PUS) with the heaviest decline in Taiwan, where the growth-sensitive benchmark index (.TWII) fell more than 3% to its lowest level since late 2020.
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Japan’s Nikkei (.N225) fell 1.75%. The Australian and New Zealand dollars each fell 1% to a two-year low. Growth-sensitive copper fell 2.7 percent and headed for its fourth straight weekly decline, while U.S. Treasuries and German bonds rose in bond markets. . EUR/GVD
Natixis head of European macro research Dirk Schumacher said that while the region was not yet in recession, there were concerns that it could be pushed into one.
New data on Friday showed that manufacturing output in the eurozone fell for the first time last month since the initial wave of the coronavirus pandemic in 2020. read more
“In Europe and globally, the cyclical picture does not look great,” Schumacher said. “There is a long list of risk factors,” he added, and “the usual safety valve (of lower interest rates or central bank stimulus) is clearly not there now.”
Across the Atlantic, S&P 500 futures pointed lower again after the benchmark US index closed its worst first half since 1970 on Thursday.
The Fed’s rapid rise in interest rates meant the government bond market took such a beating that Deutsche Bank rated the half’s performance as the weakest since 1788. Read more
However, hints of peak inflation and signs of weak growth have begun to stabilize bond markets.
Two-year Treasuries are on track for their best week since the March 2020 pandemic market crash as traders now reverse bets on a rate hike.
The movements changed again on Friday. But the yield on two-year U.S. Treasuries fell nearly 14 basis points this week to 2.91%. The 10-year yield fell about 15 basis points on the week to 2.99 percent, and the Bund yield fell to 1.39 percent from Monday’s high of 1.56 percent.
FEDWATCH Fed funds futures, which a few weeks ago pegged rates to reach 4% next year, now show markets expecting rate cuts through mid-2023 and a peak below 3.5%.
CHINA BRIGHT
The dollar was on top again on Friday, having just posted its best quarter since 2016, as US yields rose. Its reputation means that economic uncertainty has sustained it even when yields have declined.
“It’s the search for a safe haven,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore.
Other safe-haven currencies such as the Japanese yen and the Swiss franc also attracted investors. The Australian dollar fell through support at $0.6850 in Asia and was last down 1.4% at $0.6803. The kiwi fell 1.1% to 0.6178.
The yen rose about 0.2 percent to 135.40 to the dollar and slightly higher to 141.64 to the euro.
A series of surveys on Friday showed that China is emerging as an emergency. Factory activity rose steadily in June amid a slowdown in Japan and South Korea and contraction in Taiwan. Read more
Markets are also rebounding, and although the Shanghai Composite (.SSEC) and the blue-chip CSI300 (.CSI300) were down about 0.3% on Friday, each is poised to post five straight weeks of gains.
Markets in Hong Kong were closed for a holiday and the city was focused on the visit of Chinese President Xi Jinping. Read more
The yuan fell along with the broader market to 6.7136 per dollar. Gold was weighed down by a stronger dollar and US yields and was flirting with $1,800 an ounce.
Bitcoin, which suffered its biggest quarterly decline in history in the three months to the end of June, fell 3% to $19,375 on Friday.
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Additional reporting by Tom Westbrook in Singapore; Editing by Alex Richardson
Our standards: The Thomson Reuters Trust Principles.
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