arkets tumbled across the globe today on fears China is heading for a sharp slowdown and the expectation that America is poised to ratchet up interest rates.
That move should make bonds more appealing at the expense of equities, while a slump in the world’s second biggest economy due to the ongoing Covid crisis would hit demand for goods and services.
Beijing could soon be back in lockdown, sending China shares back to lows not seen since before the pandemic.
Germany could fall into recession if there is an embargo of Russian energy. Rabobank strategist Jane Foley said: “We had German officials saying last week that if there was an immediate embargo of Russian energy then it would cause a recession in Germany. And if there was a recession in Germany, that would drag the rest of Europe down and have knock on effects for the rest of the world.”
The oil price fell more than 4% to $101.9, a relief in itself, but a sign of turmoil today.
READ MOREFTSE 100 Live: China lockdown fears hit shares, oil price fallsMusk takeover of Twitter moves closer as execs meet Tesla billionaireProfits jump at Burger King UK as online sales surgeBRANDPOST | PAID CONTENTCan remote prostate cancer monitoring improve men’s quality of life?The FTSE 100 lost 150 points to 7372 – the biggest fallers were the mining giants such as Glencore and Rio Tinto. BP and Shell both fell more than 4%.
In France, the CAC 40 opened down 2%, despite signs of relief at the victory of Emmanuel Macron in the French presidential election. Other European markets followed.
China’s CSI 300 index fell nearly 5%, while Hong Kong’s Hang Seng index lost 3.9%.
The pound fell sharply on Friday to its weakest in two years following bad retail sales figures. It kept going today, at least against the dollar, losing 0.96 cents to $1.2741.
The US Federal Reserve is now expected to put interest rates up sharply in a bid to combat inflation.
Candace Browning, head of global research at Bank of America, said: “Concerns around rates and recession are now the biggest risks for investors. Spiking food and gasoline prices plus the end of key stimulus programs has investors concerned about the low-income consumer’s ability to spend.”
The Office for National Statistics revealed a new survey on the cost of living crisis, with nine in 10 adults saying they had noticed an increase in prices. More than four in ten said they would not be able to save money in the next 12 months.
AJ Bell investment director Russ Mould said: “The markets have fallen out of bed in a big way on Monday after a big sell-off in Asia amid fears of a Covid lockdown in Beijing,” says
“The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure, as supply chains in the so-called ‘factory of the world’ get disrupted, and weaker economic growth.
“The result could be stagflation – a slowing economy accompanied by surging prices – a brew few investors would be able to stomach.”
Walid Koudmani at financial brokerage XTB said:
“Market moods have deteriorated as the Covid situation in China is not improving and the media is hinting that Beijing could be next in line for a lockdown after Shanghai and several other major cities.”
