Second half begins with another beating for stocks

  • Global stocks struggle after biggest fall in index history
  • The dollar appreciates against the Aussie and the kiwi
  • The yield on the 10-year Treasury remains below 3%
  • Chinese markets stable in a sea of ​​red in Asia
  • Metals tumble as recession jitters build

LONDON, July 1 (Reuters) – The second half of the year began on Friday with another first-class beating for global stock markets, as recession fears that have built up in recent weeks also pushed oil and metals down again.

MSCI’s global equity index (.MIWD00000PUS) has had its worst start to a year since its inception in 1990 in the past six months and an early 1% drop in Europe (.STOXX) and futures of Wall Street indicated more pain to come.

Asia had also fallen (.MIAPJ0000PUS) with the biggest drop in Taiwan, where the growth-sensitive benchmark (.TWII) slipped more than 3% to its lowest since late 2020.

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The Japanese Nikkei (.N225) fell 1.75%. The Australian and New Zealand dollars each fell 1% to two-year lows. Growth-sensitive copper fell 2.7% and is heading for its fourth straight weekly decline, while US Treasuries and German Bunds rallied in bond markets. . EUR/VGD

Natixis’ head of European macroeconomic research Dirk Schumacher said that while the region was not yet in recession, the concern was that it could be pushed into it.

New data on Friday showed 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 around the world, the cyclical picture is not very pretty,” Schumacher said. “There is a long list of risk factors,” he added, and “the usual safety valve (lower interest rates or central bank stimulus) is obviously not right here right now”.

Across the Atlantic, S&P 500 futures were pointing lower again after the US benchmark index closed its worst first half since 1970 on Thursday.

The Fed’s rapid interest rate hike means the Treasury market has been so battered that Deutsche Bank rated the halving’s performance as the worst since 1788. Read more

However, it was signs of spike in inflation and signs of weak growth that began to stabilize bond markets.

Two-year Treasuries are on track for their best week since the pandemic market meltdown in March 2020, as traders now cancel bets on rising rates.

The movements became jerky again on Friday. But the US two-year yield fell nearly 14 basis points this week to 2.91%. The 10-year yield is down about 15 basis points on the week to 2.99% and Bund yields fell to 1.39% from a high of 1.56% on Monday.

FEDWATCH federal funds futures, which a few weeks ago predicted rates would hit 4% next year, now show markets expecting rate cuts by mid-2023 and at a peak below 3.5%.

BRILLIANT CHINA

The dollar was back to center stage on Friday after posting its best quarter since 2016 as US yields rose. Its reputation means that economic uncertainty has supported it even as yields have fallen.

“It’s a safe-haven demand,” 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 Aussie dollar fell thanks to support at $0.6850 in Asia and was last down 1.4% at $0.6803. The kiwi slid 1.1% to 0.6178.

The yen rose about 0.2% to 135.40 per dollar and a little further to 141.64 per euro.

A series of surveys on Friday showed China emerging as an outlier. Factory activity rebounded strongly in June in the face of slowdowns in Japan and South Korea and contraction in Taiwan. Read more

Markets are also rebounding and although the Shanghai Composite (.SSEC) and blue chip CSI300 (.CSI300) were down around 0.3% on Friday, they are each set to register five straight weeks of gains.

Hong Kong’s markets were closed for a holiday and the city focused on visiting Chinese President Xi Jinping. Read more

The yuan slipped with the broader market to 6.7136 per dollar. Gold was weighed down by stronger dollar and US yields and flirted with $1,800 an ounce.

Bitcoin, which suffered its biggest quarterly decline on record 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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