Global stocks tumble amid inflation worries; dollar up

Bloomberg

Global stocks and US equity-index futures tumbled as stubborn inflation in the world’s biggest economy bolstered the case for more aggressive monetary tightening by the Federal Reserve.
Contracts on the S&P 500 Index slid 0.7% after the equity gauge slumped to the lowest level since March 2021. Nasdaq 100 futures lost 1.1%. Equity benchmarks from Hong Kong to Europe and emerging markets dropped more than 2%. The dollar rallied for a sixth day and Treasuries gained amid haven demand. Walt Disney Co. declined in New York premarket trading after tempering its growth outlook.
The hotter-than-expected inflation reading for April raised concern the Fed’s hikes aren’t bringing down prices fast enough and policy makers may have to resort to a three-quarter point move, rather than the half-point pace markets have come to grips with. Worries such a shift would crimp economic growth, combined with Russia’s war in Ukraine and China’s struggles with Covid-19, are battering risk assets.
“Until we get a meaningful move lower in inflation, not only one print, but a consistent two, three, four prints moving in the right direction, this market may remain range bound,” Mona Mahajan, senior investment strategist at Edward Jones & Co., said on Bloomberg Television.
The dollar rises on Thursday against all of its Group of 10 peers, except the Japanese yen. The gains took Bloomberg’s gauge of the greenback’s strength to the highest level since May 2020. Meanwhile, Treasuries rallied across the curve, with the 10-year rate shedding 9 basis points.
MSCI Inc.’s index of world stocks slumped to the lowest level since November 2020 and is heading for a sixth week of losses, the longest since 2008.
“We’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,” Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors UK, said on Bloomberg Television. “Right now the big question is peak inflation.”
Walt Disney dropped 4.8% in early trading after the media giant said growth in the second half of the year may not be as fast as previously expected.
European natural gas prices jumped on worries over supplies from Russia transiting Ukraine. Oil was weaker within its trading range of $100-$110 per barrel. Copper plunged below $9,000 a ton for the first time since October and other metals slid on mounting worries about weak global demand.
Digital tokens plunged anew, victims of ebbing liquidity and evaporating demand for speculative assets. Bitcoin pared its losses to 2.9% after earlier sinking more than 10%. Zoom Video Communications Inc. lost 3.9% after Piper Sandler downgraded the stock.
The offshore yuan touched a fresh low after a Chinese central bank official said loan rates have been guided to decline. The People’s Bank of China is making stabilising economic growth a top priority and will step up support for weak sectors, Deputy Governor Chen Yulu said. The Stoxx Europe 600 falls 2.1% as of 10:02 am London time and futures on the S&P 500 also drop 0.7%.
While futures on the Nasdaq 100 sink 1.1%, futures on the Dow Jones Industrial Average also drop 0.5%.
The MSCI Asia Pacific Index falls 1.7% and the MSCI Emerging Markets Index also slumps by 2.5%. The Bloomberg Dollar Spot Index rises 0.3% and the euro falls 0.7% to $1.0441.
While the Japanese yen rises 1.1% to 128.60 per dollar, the offshore yuan falls 0.9% to 6.8260 per dollar and the British pound also drop 0.6% to as much as $1.2179.
The yield on 10-year Treasuries declined 9 basis points to 2.84% and Germany’s 10-year yield declined nine basis points to 0.90%. Britain’s 10-year yield declined 10 basis points to 1.73%.