Global markets sank, oil fell, and the euro inched closer to parity with the safe-haven dollar on Tuesday as investors fretted over further central bank tightening, renewed COVID outbreaks in China, and Europe’s energy concerns.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 1.3%, while Japan’s Nikkei fell 2%.
S&P 500 e-minis in the United States fell 0.6%, Nasdaq futures fell 0.7%, Euro Stoxx 50 futures fell 0.8%, and FTSE futures fell 0.4%.
The euro fell to $1.0005 per U.S. dollar, which is close to parity for the first time since December 2002. Investors are worried that an energy crisis could cause a recession in the area.
Yuting Shao, macro strategist at State Street Global Markets, says a risk-off attitude dominates global markets.
“The dollar is the international reserve currency. When there’s a recessionary danger or volatility, people rush to the dollar since it’s the safest “Shao,
The dollar index increased to 108.44, the highest since October 2002.
This week’s focus will be macro data, notably U.S. consumer inflation on Wednesday, and Fed statements as investors hunt for signals on the Fed’s next policy meeting before the pre-meet blackout period.
A high inflation reading would pressure the Fed to accelerate rate hikes.
After finding an Omicron subvariant that is very easy to spread, more and more Chinese cities, including Shanghai, are putting new COVID-19 restrictions in place this week to stop new infections.
Hong Kong’s benchmark Hang Seng Index sank 1.21 percent by early afternoon, while mainland China’s CSI300 fell 1.3%.
The largest single pipeline that brings natural gas from Russia to Germany will be shut down for 10 days for annual maintenance.
Investors are worried that the shutdown could last longer because of the war in Ukraine. This would cut off gas supplies to Europe and push the eurozone into a recession.
The yield on 10-year Treasury notes fell below 3% overnight as investors bought safe-haven bonds amid a Wall Street sell-off.
Despite limited supplies, growth fears weighed on oil.
Brent crude futures declined $1.35, or 1.3%, to $105.75 a barrel, and WTI crude fell $1.45, or 1.4%, to $102.64 a barrel.
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Gold dropped. Spot gold was $1728.98/oz.
